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The Mortgage Bankers Association said it expects the commercial lending recovery it has been predicting for months for 2024 to continue into 2025.
The MBA on Tuesday released its first forecast for commercial real estate secured lending through 2025, predicting that loan volume will grow 25% to $717 billion in 2025.
The portion secured by multifamily properties is expected to grow 19% to $404 billion in 2025, while loans secured by other types of property are expected to grow 32% to $313 billion.
The MBA raised its forecast for commercial real estate production by 3% overall for 2024, after having lowered it several times since predicting $906 billion in its Feb. 13, 2023 forecast. The MBA also lowered its 2023 multifamily forecast by 5%.
The MBA now forecasts commercial loan issuance to reach $576.3 billion in 2024. That's a 29.7% increase over 2023 and exceeds its Oct. 19 forecast of $559 billion this year.
Multifamily loans are forecast to be $339 billion in 2024, up 25.1% from 2023 and unchanged from the Oct. 19, 2023 forecast. Other loans are expected to increase 37.0% this year to $237 billion.
Total commercial production in 2023 is forecast to be $444 billion, down 46% from 2022 and essentially unchanged from the October 19, 2023 forecast.
Jamie Woodwell, head of commercial real estate research at the MBA, said the trend would rise from 2023 but would still not rise to 2017 levels.
“2023 will likely go down in history as the slowest year in the past decade for commercial real estate borrowing and lending,” Woodwell said. “As the market resets on factors including interest rates, property values and real estate fundamentals, these volumes should pick up slightly.”
Jamie Woodwell
Woodwell said commercial mortgage lending has historically tracked property prices, and uncertainty about the future direction of interest rates has contributed to the current economic slowdown.
“Lower interest rates and cap rates should encourage higher real estate prices and encourage borrowing,” he said. “If interest rates and cap rates remain high for an extended period of time, it will inhibit real estate activity. This uncertainty is one of the reasons we are seeing the economic slowdown today.”
The MBA reported Jan. 16 that, based on a survey of about $2.7 trillion of the $4.6 trillion in commercial real estate loans outstanding at the end of 2023, the percentage of commercial real estate loans that were 60 days or more delinquent as of Dec. 31 was 0.9%, up from 0.5% three months earlier.
The increase was driven by loans secured by office properties, with multifamily loans having significantly lower delinquency rates than other types of commercial loans, according to the MBA.
Credit unions are faring a little better: Their 60-day delinquency rate was 0.44% as of Sept. 30, up from 0.41% a year earlier, according to NCUA data.
Credit unions had $143.9 billion in real estate-secured commercial loans as of Sept. 30, up 15.8% from a year ago, according to NCUA data.
But like other lenders, credit union lending has fallen sharply: Credit unions generated $23.1 billion in commercial loans from January through September, 44% lower than in the first nine months of 2022.