Commercial real estate lending volume jumps in 2014

US commercial real estate lending increased 15% in 2014, marking the fifth consecutive year of gains, according to the CBRE Lending Momentum Index. Loan closings were boosted by demand for acquisition financing, which accounted for close to one-half of lending volume. Retail, hotel and “specialty property types” saw the biggest gains as investors focused more attention on high-yielding property types and secondary markets.

Loans on commercial and multifamily properties totaled $400bn in 2014, up 12% over the previous year, according to the Mortgage Bankers Association.

CMBS issuers were responsible for $106.3bn of the total, followed by commercial banks, which reached their second highest level on record, with $102.5bn.

“With property fundamentals and values continuing to improve, and interest rates still extraordinarily low, last year’s momentum has carried into the start of 2015,” said Jamie Woodwell, MBA’s vice president of commercial real estate research.

By property type, multifamily properties saw the highest origination volume, $150.3bn; followed by office buildings, retail properties, hotel/motel, industrial and health care.

In a separate report, CBRE noted that acquisition financing boosted volume, accounting for close to one-half of lending volume.

That report, based only on CBRE deals, showed that banks accounted for 37% of non-agency lending, ahead of life companies and CMBS conduit lenders.

“The success of banks in 2014 was due to a number of factors, including competitive fixed- and floating-rate loan products, as well as a move into financing transitional properties,” according to the report.

Commercial lending markets are “well-positioned to take advantage of further growth in 2015; lenders are showing enthusiasm for additional assignments in the upcoming months and are poised for higher production in 2015,” said Brian Stoffers, global president, debt & structured finance.

The firm expressed concern regarding underwriting standards, noting that they will continue to ease with more competition. The percentage of loans carrying either partial or full interest-only payments jumped to 65 percent in Q4, after averaging close to 50 percent over the first three quarters of the year.

 

 

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