(To read more on the debt and equity markets and the multifamily market, click here.)
WASHINGTON, DC-Commercial/multifamily mortgage debt outstanding surpassed $2.7 trillion in Q1, a 2.9% over the past three months, according to the Mortgage Bankers Association analysis of Federal Reserve Board Flow of Funds data. Multifamily mortgage debt outstanding stood at $690 billion at the end of the first quarter--an increase of $15 billion or 2.3% from the fourth quarter.
Jamie Woodwell, MBA senior director of Commercial/Multifamily Research, tells GlobeSt.com that the market is likely to continue to grow. "We are starting to see a pick-up in building and when that kicks in we will see a rise in development financing as well."
Unlike commercial retail, which is exhibit slight signs of wear and tear thanks to rising gas prices and rising interest rates, commercial multifamily fundamentals remain very strong. "Vacancy rates are decreasing and rents are increasing," Woodwell says. "Properties in general are doing better." MBA does not forecast in terms of originations, but we do see stable interest rates going forward. Also we expect to see strong performance on loans in terms of low delinquency rates continue."
Much of the increase is also due to a continued demand for commercial real estate--multifamily in particular--by institutional investors. That trend as well can be counted on to remain steady as innovations continue to develop in CMBS and CDO technology, Woodwell says. "These innovations provide an avenue for a whole range of investors to invest in commercial multifamily."
With almost $1.2 trillion, or 43% of the total, commercial banks continue to hold the largest share of commercial/multifamily mortgages. However, many of the commercial mortgage loans reported by commercial banks are in fact commercial and industrial loans to which a piece of commercial property has been pledged as collateral. In these cases, it is the borrower's business income that drives the underwriting, pricing and performance of the loan, and not rental income. This skews comparison with other investors somewhat as those loans are income property loans.
At 21% of the total, CMBS pools are the second largest holders of commercial/multifamily mortgages, holding $577 billion. Life insurance companies hold $269 billion, or 10% of the total, and savings institutions hold $202 billion, or 7% of the total. Government Sponsored Enterprises hold $132 billion in multifamily loans that support the mortgage-backed securities they issue and an additional $66-billion whole loans in their own portfolios, for a total share of 7% of outstanding commercial/multifamily mortgages.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
