$102.2B Commercial loan originations hit new peak last year
The projected dollar volume of multifamily and commercial mortgage originations in
2017 was expected to set a record, the Mortgage Bankers Association (MBA) reported.
The MBA projected — based on preliminary data from a quarterly survey of originators
— that overall originations rose by 15 percent in 2017, compared with the prior-year level.
Hotel property originations rose year over year by 26 percent; industrial by 22 percent;
multifamily by 17 percent; office by 12 percent; and health care properties by 9 percent.
Mortgage originations for retail properties declined by 21 percent compared to 2016,
however, MBA reported.
Industrial properties yield solid 2017 returns
Driven by a huge demand for warehouse space from e-commerce giant Amazon.com
and other online retailers, industrial properties were the top performers for investors in
2017, according to the National Council of Real Estate Investment Fiduciaries (NCREIF).
Industrial properties yielded a total return of 3. 28 percent this past fourth quarter, or an
annualized return of 13.1 percent. Other major asset classes lagged well behind, however. Overall, investment-grade commercial property yielded solid, but not spectacular,
returns for investors in 2017, NCREIF reported. The total annualized return for unleveraged
properties in 2017 was nearly 7 percent, down from the average of 10. 3 percent over the
past five years. Leveraged properties yielded 2.3 percent in the past fourth quarter, or an
annualized return of 9. 4 percent, NCREIF reported.
CMBS payoff rates bounce back
Payoff rates for loans packaged into commercial mortgage-backed securities (CMBS)
will likely return to more normal levels in 2018, following two consecutive years of
weak performance, Morningstar Credit Ratings reported. The payoff rate for CMBS
loans finished 2017 at 72. 3 percent, down from 75. 6 percent in 2016, and below the
nearly 85 percent payoff rate in 2015, Morningstar reported. The payoff rate in 2017
exceeded expectations, however, suggesting that asset owners had ample sources
Commercial property prices gained steam in 2017
Commercial asset prices ended 2017 significantly higher than during the last boom.
Assets valued at or greater than $2.5 million posted an aggregate annual price gain of
7.1 percent in 2017, ending the year 23. 7 percent higher (without adjusting for inflation)
than a decade earlier, during the last market peak, according to Real Capital Analytics’
all-property index. The solid price appreciation in 2017 occurred despite a decline in
asset sales. Sales-transaction volume declined for the second straight year.
Commercial originations will cool in 2018
Rising interest rates and other pressures are likely to lower commercial mortgage origination volume slightly in 2018, according to the MBA. The trade group projected that
overall commercial and multifamily originations will total $549 billion in 2018, down
3 percent from the 2017 estimate, which was at a record level. The MBA projects that
multifamily lending alone will total $271 billion in 2018, roughly the same as in 2017. n
By Victor Whitman
The volume of outstanding commercial and
multifamily mortgages held by nonbanks
and investors that will mature in 2018,
down 42 percent from 2017
Source: Mortgage Bankers Association
The total sales-transaction volume of
commercial properties valued at or more
than $2.5 million in 2017, down 7 percent
year over year
Source: Real Capital Analytics
The average leverage level on an
investment-grade commercial property
as of this past fourth quarter
Source: National Council of Real Estate Investment Fiduciaries