The commercial/multifamily loan originations market grew by 10% in 2006, with mortgage bankers closing $406.1 billion in commercial/multifamily loans, according to the Mortgage Bankers Association 2006 Commercial Real Estate/Multifamily Finance: Annual Origination Volume Summation. The annual study was released earlier today.
Increases were seen across every property type and most investor groups, and were led by increases in loans for office buildings and loans intended for commercial bank and savings institution portfolios.
"The $406 billion in originations volume in 2006 marked a new high," says Jamie Woodwell, senior director of commercial/multifamily research at Washington, D.C.-based MBA. In 2005, mortgage bankers closed $345 billion in commercial/multifamily loans.
"Conduits packaging loans for commercial mortgage-backed securities (CMBS), collateralized debt obligations (CDOs) and other asset-backed securities (ABS) continued to be the dominant investor group in 2006, and office properties surpassed multifamily as the dominant property type," adds Woodwell.
The increase in originations from 2005 to 2006 was driven by both higher loan amounts (the average loan size jumped by $11.5 million during that 12-month period) and by a greater number of loans being closed. Loan amounts rose in tandem with property valuations. In general, the availability of funds for commercial/multifamily real estate has been part of an economy-wide availability of capital.
CMBS, commercial real estate collateralized debt obligations (CRE CDOs) and ABS were the largest single investor group for these mortgages. This segment bought $185.6 billion, or 46%, of the closed loan volume. Office buildings were the dominant property type representing $104 billion, or 26% of the lending total.
Among major investor groups, real estate investment trusts saw the greatest percentage increase in volume between 2005 and 2006, followed by commercial banks/thrifts; Freddie Mac; life insurance companies; Fannie Mae and CMBS, CDO and other ABS conduits.
Lending for multifamily properties, which had been the leading property type for originations in 2005, dropped to second behind office property originations. Lending to multifamily properties grew by just 1% between 2005 and 2006. Lending for office properties, retail, industrial, hotel/motel and health care all posted greater growth.