Commercial originations slide in Q4 with further slippage expected this year

Commercial and multifamily loan originations saw further slippage in the fourth quarter of 2022, with more declines expected in 2023, according to new data released by the Mortgage Bankers Association (MBA).

Announcing its findings at the 2023 MBA Commercial/Multifamily Finance Convention and Expo in San Diego, the trade group reported a 54% year-over-year decrease in commercial and multifamily originations during Q4 2022. Compared to the previous quarter, fourth-quarter originations were down 23%.

“Borrowing and lending backed by commercial and multifamily properties slipped further to close out 2022,” said Jamie Woodwell, MBA’s head of commercial real estate research. “The last quarter of the year typically sees the highest volumes, but the chill caused by rising interest rates, questions about property valuations and increased economic uncertainty made the fourth quarter of 2022 the weakest of the year.”

Every major asset class experienced a large annual decrease in fourth-quarter volume. Industrial properties posted the largest drop at 69%, followed by office (-56%), multifamily (-52%), hotels (-46%) and retail (-44%). The most prominent increase in origination dollar volume came in the health care sector, which saw a 4% increase.

With fourth-quarter figures not yet officially confirmed, the preliminary full-year tally for 2022 has commercial and multifamily origination volumes at $804 billion, 10% lower than one year prior. Office properties were hardest hit over the course of the full year, with dollar volumes down 30% from 2021. Industrial properties saw volumes fall 12% annually, while multifamily volumes dropped 11%. Retail properties, on the other hand, saw a 16% year-over-year increase in origination volume, as did hotels. Health care originations grew 23%.

The MBA’s most recent forecast, also released in San Diego, calls for more decreases this year before the picture grows rosier in 2024. Total commercial and multifamily lending is projected at $684 billion this year, down 15% annually. Multifamily lending alone is expected to decrease 16% to $384 billion.

The MBA does see a rebound in the cards next year, with total commercial and multifamily volume anticipated at $906 billion. Multifamily by itself is expected to reach $486 billion in originations.

“MBA’s updated forecast is built on a base case of economic weakness at the start of 2023 with a moderation in interest rates and an overall improvement in the economy as the year goes on,” Woodwell said. “Given changes in interest rates and investment yields over the last year, new deals and loans are sizing differently than in previous years. 

“These new changes will take time for buyers and sellers to digest, and we expect the logjam to suppress volumes this year.”


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