In commercial and multifamily borrowing, the start of 2024 echoed the trends of the previous year, characterized by a sluggish pace with a few notable exceptions. According to the Mortgage Bankers Association (MBA), overall loan originations in the first quarter varied significantly across different property types. However, only two sectors showed increases compared to the previous year. Notably, loans in the industrial property sector experienced a substantial 63% boost in dollar volume, while hotel property originations saw an 8% increase.
One standout player in the industrial sector was Blackstone-affiliated borrowers, who accounted for over $7 billion of industrial refinancing activity this year. This surge in industrial lending was supported by early signs of renewed demand for industrial space. Despite low sales in warehouse-intensive retail categories like furniture and building materials, there has been an overall uptick in real consumer goods spending, signaling a positive trend in the industrial property market.
Amazon, known for its massive presence in the online retail space, returned to its roots by signing million-square-foot leases, further reinforcing the momentum in industrial real estate. However, the borrowing landscape remained relatively muted in other property types, with borrowing essentially unchanged in the first quarter compared to the previous year.
"Elevated interest rates and uncertainty about their direction have kept many current owners on the fence, with little commending a sale or refinance unless something forces the issue," remarked Jamie Woodwell, MBA’s head of commercial real estate research.
The retail sector led the decline, with a notable 31% year-over-year decrease in loan volume. Healthcare properties followed with a 22% decline, while office and multifamily properties experienced drops of 21% and 7% respectively.
By lender type, there was a significant decrease in the dollar volume of loans originated by banks and savings and loans, down by 41% year-over-year. Government-sponsored multifamily finance enterprises Fannie Mae and Freddie Mac also reduced lending by 17%.
However, despite the decline in lending from traditional sources, other lenders stepped up to fill the gap. Commercial mortgage-backed securities markets nearly doubled origination volume, marking a 93% increase in dollar volume. Nonbank lenders and life insurance companies also increased their lending activity by 41% and 35% respectively.
"With loan maturities and other triggers increasingly likely to prompt action, property owners, potential owners, lenders, and others are all working through the specifics of each property to identify the level of mortgage debt that property can support," explained Woodwell. "New loan originations should follow as this continues."
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