Commercial and Multifamily Lending Markets Set Up for Growth in 2021

Commercial and multifamily lending markets are poised for strong growth in 2021. According to a new report from the Mortgage Bankers Association, mortgage maturity volumes are likely to increase 36% this year, while commercial and multifamily lending are forecasted to increase 11%.

Commercial and multifamily mortgage bankers are predicted to close $486 billion this year—an increase from the $440 billion in loan volumes closed in 2020—with multifamily lending driving the growth. The sector alone is set to increase 7% this year, up $323 billion in 2021. By comparison, multifamily lending activity totaled $302 billion in 2020.

This is likely the beginning of recovery for the lending markets after a paltry performance in 2020 due to the pandemic. “The steep declines in mortgage borrowing and lending seen in 2020 should partially reverse in 2021. The economic rebound MBA anticipates in the second half of the year should bring greater stability to the markets, but with continued differentiation by property type,” Jamie Woodwell, MBA’s VP for commercial real estate research, said in the firm’s forecast report.

Maturities will also increase this year. This year, 10% or $223 billion of the total $2.3 trillion of commercial mortgage debt is scheduled to mature this year. This is a 36% increase in loan maturities compared to 2020, when maturities totaled $163.2 billion.

There is no clear trend in which capital segments will see the bulk of these maturities. Multifamily and health care mortgages held by Fannie Mae, Freddie Mac, FHA and Ginnie Mae represent 1% of the total maturities; life insurance companies hold a total of 6% of maturities or $39.8 billion; and 16% of CMBS loans are coming due. “Commercial and multifamily mortgage maturities among non-banks lenders are the highest since at least 2009,” said Woodwell. “Many life company, GSE and FHA loans that would have been coming due this year were instead refinanced or prepaid early. Those declines have been more than made up for by shorter-term loans with 2021 maturity dates made by CMBS and investor-driven lenders.”

This is a bright outlook considering the low bar the market set last year. In December, CMBS delinquencies were still on the rise, according to an end-of-the-year report from MBA, with 5.7% of commercial mortgages delinquent in November, increasing from 5.4% in October.