In its inaugural forecast of the commercial/multifamily real estate finance markets, the Mortgage Bankers Association (MBA) projects originations of commercial and multifamily mortgages will hit $230 billion in 2012, an increase of 17 percent from 2011 volumes, and continue to rise to $290 billion in 2015.
The association also expects commercial/multifamily mortgage debt outstanding to grow in 2012, ending the year above $2.4 trillion, two percent higher than at the end of 2011. By the end of 2015, mortgage debt outstanding is forecast to exceed $2.5 trillion. MBA revealed its forecast at its Commercial Real Estate/Multifamily Housing Convention in Atlanta. Overall, 2,300 attendees came to this year’s conference.
Commercial/multifamily mortgage bankers' originations volumes are projected to rise to $230 billion in 2012, $245 billion in 2013, $265 billion in 2014 and $290 billion in 2015. The increases in originations activity will push commercial/multifamily mortgage debt outstanding to $2.4 trillion by the end of 2012 and more than $2.5 trillion in 2015.
The reemergence of the CMBS sector and activity by dedicated commercial real estate finance lenders will drive the rise in originations, according to MBA’s projections. The association sees CMBS sector output rising to $40 billion in 2012 and then climbing each year to $100 billion in 2015. It projects dedicated commercial real estate finance lenders, meanwhile, to rise their activity from $61 billion in 2011 up to $100 billion by 2015. In contrast, it expects life company volume, which amounted to about $45 billion in 2011, to decline slightly in coming years and be at $40 billion in 2015. Overall, after a 64 percent year-over-year rise in originations from 2010 to 2011, the association expects volume to rise 17 percent in 2012, seven percent in 2013 and nine percent in both 2014 and 2015.
Fourth quarter originations
In other research unveiled at the show, the MBA said that commercial/multifamily originations during the fourth quarter of 2011 were up 13 percent over the fourth quarter of 2010, but fell seven percent from the third quarter of 2011. The 13 percent year-over-year rise was driven by increases in originations for industrial and multifamily property types. The increase included a 43 percent increase in loans for industrial properties, a 31 percent increase in loans for multifamily properties, an eight percent decrease in loans for retail properties, a 24 percent decrease in loans for health care properties, a 29 percent decrease in office property loans and a 44 percent decrease in hotel property loans.
Among investor types, loans for commercial bank portfolios increased by 122 percent compared to last year's fourth quarter. There was also a 17 percent increase in loans for Government Sponsored Enterprises (or GSEs - Fannie Mae and Freddie Mac), a 13 percent decrease in loans for life insurance companies and a 50 percent decrease in loans for conduits for CMBS.
However, fourth quarter 2011 commercial and multifamily mortgage originations were seven percent lower than originations in the third quarter of 2011.
“There was a pullback from the third quarter to the fourth quarter driven by uncertainty,” Jamie Woodwell, MBA’s vice president of commercial real estate research, said at the show. The sovereign debt crisis in Europe led to a slowdown that began in the fall and affected the rest of the year. Moreover, life insurance companies, which set an industry record for originations in 2011, backed off a bit in the fourth quarter as firms met allocation targets and slowed their lending activity.
Compared to the third quarter, fourth quarter originations for hotel properties saw a 52 percent decrease. There was a 39 percent decrease for office properties, a 24 percent decrease for retail properties, a 29 percent increase for multifamily properties, a 51 percent increase for industrial properties, and a 153 percent increase for health care properties.
Among investor types, between the third and fourth quarters of 2011, loans for conduits for CMBS saw a decrease in loan volume of 26 percent, loans for life insurance companies saw a decrease in loan volume of 23 percent, originations for commercial bank portfolios decreased 16 percent and loans for GSEs increased by 34 percent.
Coming maturities
In another report, the MBA said that $150.6 billion in commercial and multifamily mortgages held by non-bank lenders and investors would mature in 2012—about 10 percent of the outstanding total. The figure is three percent less than the $154.7 billion in mortgages held by non-bank lenders that matured in 2011.
The loan maturities vary significantly by investor group. Just four percent ($12.4 billion) of the outstanding balance of multifamily and health care mortgages held or guaranteed by Fannie Mae, Freddie Mac, FHA and Ginnie Mae will mature in 2012. Life insurance companies will see six percent ($19.6 billion) of their outstanding mortgage balances mature in 2012. Among loans held in CMBS, 11 percent ($72.0 billion) will come due and 29 percent ($46.6 billion) of commercial mortgages held by credit companies and other investors will mature in 2012.
MBA's 2011 survey collected information directly from servicers on the years of maturity of $1.46 trillion in outstanding non-bank commercial/multifamily mortgages. The dollar figures reported are the unpaid principle balances as of December 31, 2011. Banks and thrifts hold an additional $793 billion in mortgages backed by income producing properties which are not covered by this survey.