Banks Take Lead in CRE Debt Growth

Woodwell notes that CMBS’ share of total commercial/multifamily debt continues to decline.

WASHINGTON, DC—The Mortgage Bankers Association said Tuesday that banks and thrifts posted the largest dollar increase in commercial/multifamily debt outstanding among the four major classes of lenders. Banks’ 2.5% uptick in the first quarter from Q4 2015 was more than twice as large as the 1.2% increase overall. The GSEs posted a similar quarter-to-quarter increase on a percentage basis, albeit with lower dollar volume. Overall, total commercial/multifamily debt outstanding rose to $2.86 trillion as of March 31, an increase of $35.3 billion from the previous quarter. More than one-third of the total is in multifamily debt, which stood at $1.07 trillion at the end of Q1. Multifamily lending also accounted for more than half of the quarterly increase in debt outstanding, at $18.2 billion. Banks’ level of commercial/multifamily mortgage debt outstanding rose by $26.4 billion during the quarter, compared to $11.3 billion for agency and GSE portfolios and MBS. For both classes, however, the increase was 2.5%. Reflecting banks’ top ranking as lenders in commercial real estate, their $26.4-billion increase represented 75% of the quarterly increase. Life insurance companies posted a $5-billion increase, up 1.3% from the previous quarter, while the largest percentage gain was recorded by other insurance companies, up 8.2% to $13.3 billion. However, insurers other than life companies rank near the bottom in terms of lenders’ share of outstanding commercial/multifamily mortgage debt. Faring less well was the class known collectively as CMBS, CDO and other ABS issues. Although this class holds the second largest slice of the commercial/multifamily debt pie at 17.6%, compared to 38.6% for banks and thrifts, its share declined 2.3% on a percentage basis and nearly $11.7 billion on a dollar basis from the previous quarter. “The amount of commercial and multifamily mortgage debt outstanding continues to grow at a strong clip,” says Jamie Woodwell, VP of commercial real estate research at MBA. “Bank holdings and multifamily loans backed by Fannie Mae and Freddie Mac drove growth during the quarter. However, the balance of loans held in commercial mortgage-backed securities continues to decline and has now fallen by one third since it peaked in 2007, as more CMBS loans are paid off and paid down than are originated.”