Commercial real estate companies to benefit from uptick in mortgage originations

Posted on August 5, 2013

The entire commercial real estate directory got a boost last quarter as mortgage originations increased year-over-year for the second time this year.

The National Mortgage Professional Magazine reported data from the Mortgage Bankers Association revealing commercial and multifamily mortgage origination volume increased by 7 percent during the second quarter compared to the second quarter’s 2012 performance. In addition to a year-over-year gain, overall mortgage origination volume climbed 36 percent when compared to the first quarter 2013.

“Commercial and multifamily mortgage lending and borrowing continued to grow during the second quarter,” said Jamie Woodwell, MBA’s vice president of commercial real estate research.

The MBA Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations also found the dollar volume of multifamily loans increased 31 percent, in addition to a 3 percent increase for hotel properties. Otherwise, dollar volume of commercial loans for retail, healthcare properties decreased while office and industrial dollar volumes remained unchanged. However, the number of originations for specific property types climbed drastically from Q1 to Q2. For instance, hotel property originations rose 89 percent. Office properties, too, exceeded the previous quarters figures by 75 percent. Retail and industrial properties both experienced increases around 45 percent while the multifamily sector experienced a 22 percent loan origination increase from the previous quarter.

“The apartment market continues to be the belle of the ball, with multifamily mortgage originations running 31 percent ahead of last year’s first half total,” Woodell added. “And after a slow start to the year, lending by life insurance companies surged in the second quarter to record the highest quarterly volume on record for that sector.”

Influx of investors

Of all the sectors, multifamily properties experienced the least quarterly change due to its prolonged success. The large quarterly shifts from other sectors, such as hotels and office properties could be correlated with the climb of life insurance loan originations – which rose by 16 percent – as well as a 13 percent increase in commercial bank portfolios and an 8 percent jump in Freddie Mac and Fannie Mae loans.

When evaluating  the performance of each sector, the year-to-date figures paint a clearer picture. It appears that the challenges in the retail sector are still lingering, as retail properties have experienced a 19 percent decrease. The same goes for health care, which experienced the greatest year-to-date decrease of 27 percent. However, the second quarter was best for multifamily properties and hotels, which experienced a 31 percent and 13 percent year-to-date increase, respectively.