Commercial and Multifamily Borrowing Drops 56% in Q1

Article originally posted on Multifamily Executive on May 18, 2023

Commercial and multifamily mortgage loan originations were 56% lower in the first quarter compared with the same period in 2022, according to the Mortgage Bankers Association (MBA). Originations also decreased 42% from the fourth quarter.

For multifamily properties alone, originations saw a 55% year-over-year drop and a 44% quarter-over-quarter decrease, according to the MBA’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers.

“While the first quarter is typically the quietest quarter of the year, borrowing and lending backed by commercial and multifamily properties declined in the first quarter to the slowest pace since the first quarter of 2014,” said Jamie Woodwell, head of commercial real estate research at the MBA. “Uncertainty and volatility in regard to interest rates and property values, and supply and demand imbalances for some property types, has led to a logjam in commercial real estate sales and financing markets.”

He added, “As loans mature and adjustable-rate loans reset, we should start to get greater insights into where things stand.”

Industrial properties saw the biggest year-over-year drop, with originations decreasing 72%, followed by a 69% decline for health care properties, and a 67% drop for office properties. Quarter over quarter, originations for health care properties decreased 65%, followed by a 61% decline for office properties.

Among investor types, the dollar volume of loans originated for life insurance companies decreased 73% on a year-over-year basis. In addition, declines were seen for investor-driven lenders, 67%; commercial mortgage-backed securities (CMBS), 59%; depositories, 54%; and government-sponsored enterprises (GSEs), 14%.

Most of the quarter-over-quarter results were down among investor types. The dollar volume of loans for life insurance companies dropped 56%, followed by depositories decreasing 48%, investor-driven lenders declining 42%; and GSEs down 40%. However, the dollar volume of loans for CMBS increased by 99%