After a Few Q1 Bumps, CRE Lending Solid
Year-over-year, alternative lending and life companies’ lending up; bank lending down.
Commercial real estate investing has recovered from an up-and-down first quarter when a fast start stalled in reaction to the war in Ukraine as credit spreads and loan indexes widened with the uncertainty.
“Many are very active again, quoting with generally wider spreads in line with corporate bonds,” said Brian Stoffers, Global President of Debt & Structured Finance for Capital Markets at CBRE, said in prepared remarks included in his firm’s Q1 CRE lending report issued last week.
Stoffers also pointed to rising inflation and increased interest rates as challenges the industry is working to overcome today
The CBRE Lending Momentum Index released in the report found that lending was up by 69% year-over-year and 5.5% quarter-over-quarter. It now stands 50% above its February 2020 pre-pandemic close.
Bank Lending Down, Alternative Lending Up
The most active non-agency drivers of commercial origination activity were banks (down from 39.2% a year ago); alternative lenders (up from 30.6% a year earlier); and life companies (up 19.2% compared to a year ago.)
Transactions involving alternative lenders “were primarily floating rate multifamily bridge loans with an average term to maturity of 43 months,” according to CBRE. “Collateralized loan obligations (CLOs), which many alternative lenders use to term finance their loan portfolios, recorded $15.2 billion in issuance in Q1 2022—up from $8.9 billion in Q1 2021,” the firm reported.
CMBS conduit loans accounted for the remaining 3.5% in non-agency lending, down from 11% a year ago.
Government agency lending fell 12.9% from a year ago, totaling $30.9 billion in Q1 2022. This reflects the average agency fixed mortgage rates for closed permanent loans with a seven- to 10-year term, increased by 20 bps in Q1 2022 and 30 bps from a year ago to average 3.48%, CBRE said.