SAN DIEGO — The Washington, D.C.-based Mortgage Bankers Association (MBA) is predicting originations of commercial and multifamily mortgages to grow to $254 billion in 2013, an 11 percent spike from 2012. MBA previewed its second annual forecast at its Commercial Real Estate Finance (CREF)/Multifamily Housing Convention & Expo in San Diego. Approximately 2,600 real estate finance professionals have registered for the show, which runs through mid-day Wednesday.
“2012 was a strong year for the commercial and multifamily mortgage markets, and 2013 is shaping up to continue the growth,” says Jamie Woodwell, MBA’s vice president of commercial real estate research.
Multifamily originations will take the lion’s share of the 2013 activity, according to the forecast. Originations of multifamily mortgages are forecast to reach $100 billion in 2013.
Additionally, mortgage debt outstanding for commercial and multifamily properties is anticipated to grow in 2013 by more than 2 percent. The forecast calls for 2013 to end the year above $2.4 trillion.
The forecast extends beyond 2013. MBA is also predicting that originations will keep its upward trajectory and close 2015 at $289 billion.
Jay Brinkmann, MBA’s chief economist and senior vice president of research and education, explains that the commercial real estate finance forecast is based on surveys and research of the finance markets and is a useful indicator for MBA members.
“In only its second year, it’s already becoming a key tool MBA’s members rely on as part of their business planning,” says Brinkmann.
MATURING DEBT SURVEY
The MBA has also issued its 2012 Commercial Real Estate/Multifamily Survey of Loan Maturity Volumes, which reports $119.5 billion of commercial and multifamily mortgages held by non-bank lenders and investors will mature in 2013. The amount is 8 percent of the total outstanding balance.
Approximately $150.6 billion matured in 2012, according to the survey. The $119.5 billion maturing in 2013 is a 21 percent drop compared to the total in 2012.
“Despite a 21 percent decline in the volume of commercial and multifamily mortgages maturing this year, we expect origination volumes and the amount of mortgage debt outstanding will both increase,” affirms Woodwell.
The survey indicates that loan maturities vary significantly by investor group. Only 5 percent ($16 billion) of mortgages held by Fannie Mae, Freddie Mac, FHA and Ginnie Mae will mature in 2013. Likewise, life insurance companies and CMBS lenders will have 7 percent ($21.9 billion and $43.4 billion, respectively) of their outstanding mortgage balances mature in 2013.
Credit companies and other investors, however, will see a larger chunk come due compared to the life insurance, agency and CMBS lenders. The survey found that 21 percent ($38.1 billion) of commercial mortgages held by credit companies and other investors will mature in 2013.
Compared to 2012 loan maturities, the volume of loans maturing in 2013 will increase for life insurance companies and agency lenders. CMBS lenders, credit companies and other investors will experience a drop in maturing loans.
“During the recession, and even in more recent years, approaching commercial and multifamily mortgage maturity volumes were referred to as akin to a ‘ticking time-bomb’ that would overwhelm the real estate finance markets,” explains Woodwell. “In reality, the relatively long-term nature of commercial and multifamily mortgage debt helped the market weather the recession and its slow recovery.”
Woodwell goes on to explain that mortgages are typically long-term loans and each year since 2010 the volume of commercial and multifamily mortgages maturing in that year has declined. According to the survey, the volume of loans maturing in 2013 and 2014 will mark cycle lows for loan maturities, each representing less than 8 percent of the outstanding balance of loans.
LOOKING BACK AT 2012
The MBA is reporting in its Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations that commercial and multifamily mortgage originations increased 49 percent between the third and fourth quarters of 2012. Also, the organization’s commercial/multifamily mortgage bankers originations index shows that originations for 2012 were 24 percent higher than in 2011.
“Low interest rates are prompting borrowers to finance, and improving property markets are helping more deals underwrite successfully,” says Woodwell. “The relative strength of commercial and multifamily mortgages as investments continues to fuel lenders’ appetites.”
Additionally, fourth quarter 2012 originations were up 49 percent compared to fourth quarter 2011 originations, according to the survey. The increase was driven by a 331 percent increase in the dollar volume of loans for hotel properties, 78 percent increase for office properties, a 49 percent increase for multifamily properties, a 46 percent increase for industrial properties and a 5 percent increase in retail properties. There was a 26 percent decrease in healthcare loans.
Woodwell reports that “during the fourth quarter, commercial and multifamily mortgage borrowing and lending hit the highest level since 2007.”
— John Nelson