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WASHINGTON, DC (April 23, 2024) — Total commercial real estate (CRE) mortgage borrowing and lending is estimated to reach $429 billion in 2023, down 47% from the $816 billion in 2022 and down 52% from the all-time high of $891 billion in 2021. This is according to the Mortgage Bankers Association's (MBA) 2023 Commercial Real Estate/Multifamily Finance Annual Loan Total.
Excluding the activity of small and mid-size depository institutions, which are not directly captured, the MBA study projects that commercial mortgage-only banks closed $306 billion in loans in 2023. This is 49% lower than the $595 billion reported in 2022.
“Rising interest rates, uncertainty about property values and questions about the fundamental condition of some properties led to a sharp decline in borrowing and lending backed by commercial real estate last year,” said Jamie Woodwell, MBA's director of commercial real estate research. “The declines were broad-based and encompassed every major property type and funding source. The sustained increase in CRE mortgage outstanding indicates that the decline in originations was driven in large part by weakened borrower demand due to a slowdown in purchase-sale transactions and refinancings. When property owners were able to stay put, they typically did so.”
Woodwell added, “2024 is showing signs of being off to a moderate start. While rising interest rates will likely remain a deterrent for many property owners, the arrival of more than $900 billion in maturities, and perhaps a nod to higher interest rates, could bring more activity to the market this year.”
Among various property types, multifamily housing saw the highest transaction volume last year, with an estimated $264 billion in total loans, of which $178 billion was directly tracked by captive mortgage bankers. First liens accounted for 96% of mortgage banker volume.
Mortgage banks reported closing $306 billion in CRE loans in their own name and facilitating $225 billion in other transactions, and they also reported acting as investment sales facilitators in $225 billion of transactions.
The primary source of funding for CRE mortgage debt is depository institutions, followed by life insurance companies and pension funds, government-sponsored enterprises (Fannie Mae and Freddie Mac), private label CMBS, and investor-led lenders.
Media representatives who would like a copy of the report should contact Falen Taylor. [email protected].
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