The Mortgage Bankers Association (MBA) expects a record origination volume of $683 billion for commercial and multifamily mortgages in 2020.
That’s a 9% increase from the anticipated 2019 volume of $628 billion — which would also set a new record. The MBA announced the projected figures this week in its commercial real estate finance forecast report.
The 9% year-over-year increases in 2019 and 2020 are each small improvements compared to recent historical trends, following 8% annual increases in both 2017 and 2018. Total multifamily lending — which includes some loans made by small and midsize banks that aren’t included in the overall total — also is expected to grow by 9% to $395 billion in 2020.
The two record years of origination volume are expected to give way to a slight decline in 2021, with volumes dropping to $660 billion for combined commercial and multifamily debt and $392 billion for multifamily loans. Even with the decrease, however, next year’s anticipated volume would still be an increase of 15% from the overall origination volume of $574 billion in 2018.
“Commercial and multifamily real estate markets got a shot in the arm from low interest rates in 2019,” said Jamie Woodwell, MBA’s vice president for commercial real estate research. “In addition to making mortgage borrowing less expensive, lower yields on a broad array of investment options are buoying the values of industrial, apartment, office, retail and other income-producing properties.
“This increase in property values is expected to translate into increased sales transactions and demand for mortgage debt in 2020.”
Indeed, low interest rates continue to encourage stout levels of commercial and multifamily borrowing. The MBA recently reported that, in third-quarter 2019, every major capital source was lending at rates above 2018 levels. Commercial and multifamily mortgage originations were 24% higher in the third quarter of last year compared to one year earlier and 9% higher than in second-quarter 2019.
Financing for commercial and multifamily properties also continue to perform well, with delinquency rates at or near record lows for nearly every capital source. The delinquency rate for commercial banks, in fact, is at its lowest figure since the MBA began tracking it 25 years ago. Along with the strength in property values, solid fundamentals and low interest rates are helping to hold delinquencies in check.