Mortgage loan originations for commercial and multifamily properties dropped 13 percent in the third quarter compared to the third quarter of 2021, according to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.
“After a strong first half of the year, rising interest and capitalization rates began to affect deal volume during the third quarter,” Jamie Woodwell, MBA’s head of commercial real estate research, said. “Increasing yields across investment alternatives – including the 10-Year Treasury yield more than doubling during the first nine months of the year – have shifted property financing and values, and it will take time for the market to fully absorb these changes. Volatility has been equally impactful, making the sizing of transactions extremely difficult. The result has been the first of what may be many quarters of depressed borrowing and lending activity.”
The most significant drops in originations in the quarter were for office, multifamily, and retail. Specifically, office decreased by 44 percent, multifamily decreased by 16 percent, retail decreased by 6 percent, and industrial decreased by 4 percent. On the positive side, lending backed by hotel properties increased by 24 percent, and health care increased by 61 percent.
Among investor types, the volume of loans originated for Commercial Mortgage-Backed Securities (CMBS) decreased by 71 percent, while life insurance company portfolios decreased by 42 percent. Further, government sponsored enterprises (GSEs – Fannie Mae and Freddie Mac — decreased by 15 percent, while investor-driven lenders decreased by 8 percent. Originations for depositories increased by 25 percent.
“Different capital sources have felt the slowdown in different ways – with third-quarter originations in the CMBS market down almost 75 percent from a year earlier, while originations by banks and other depositories were 25 percent higher. A broad decline in transaction activity is likely to impact all capital sources, although perhaps not equally,” Woodwell said.