Commercial and multifamily mortgage loan originations in the third quarter remained substantially lower—49%—than a year ago, according to the Mortgage Bankers Association (MBA). In addition, originations declined 7% from the second quarter.
“Borrowing backed by commercial real estate properties declined again in the third quarter,” said Jamie Woodwell, head of commercial real estate research at the MBA. “Borrowing and lending were down for every property type and capital source from one year ago. However, compared to this year’s second quarter, volumes were more stable, and some sectors–including industrial properties and life company lenders—showed an uptick in volume.”
Year to date, Woodwell said commercial real estate borrowing has declined 44%, citing questions about some properties’ fundamentals, uncertainty about property values, and higher and volatile interest rates. “Greater certainty around those conditions is a key prerequisite to breaking the logjam of transaction activity,” he added.
While all major property types saw declines in originations, multifamily properties experienced a 50% year-over-year drop from the third quarter of 2022, according to MBA’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations. Health care properties had the biggest year-over-year decline in originations at 76%, followed by hotel properties and retail properties with decreases of 52% and 51%, respectively. In addition, office loans saw a year-over-year drop of 49%, and industrial properties had a 35% decrease.
Year over year, the dollar volume of loans originated for depositories dropped by 73% in the third quarter, while investor-driven lenders experienced a 55% decrease. Government-sponsored enterprise (GSE) loans decreased 27%, while commercial mortgage-backed securities (CMBS) saw a 5% drop and the dollar volume of life insurance company loans was down 4%.
Quarter over quarter, originations for health care properties in the third quarter declined 28%. Originations for retail properties dropped 20% from the second quarter, while multifamily originations saw a 16% decrease. However, originations increased for hotel, office, and industrial properties in the quarter, with industrial seeing a 36% quarter-over-quarter bump.
Among investor types quarter over quarter, the dollar volume of CMBS loans declined 21% in the third quarter, followed by loans for depositories dropping 19% and originations for investor-driven lenders decreasing 13%. GSE loans declined 4%, while the dollar volume of loans for life insurance companies increased by 18%.
