Commercial-property sales in 2018 will top 2017 totals
Commercial real estate deal volume in 2018 was on pace through September to easily
surpass the 2017 total. Sales of commercial properties stood at $394 billion year to date
through this past September, up 11 percent compared to the $356 billion total for the
same period in 2017, Real Capital Analytics reported. The final 2018 transaction volume
for properties valued at $2.5 million or more likely will not surpass 2015’s record of
$569 billion, however.
Commercial lending declines on higher rates
Overall commercial/multifamily lending volume declined by 3 percent this past
third quarter, compared with the prior quarter, and was down 7 percent compared
to a year earlier, the Mortgage Bankers Association reported. For third-quarter 2018,
compared with a year earlier, the dollar volume of loans underpinning commercial
mortgage-backed securities fell by 53 percent while commercial bank portfolio-loan
volume declined by 22 percent. Originations increased 4 percent year over year for life
insurance companies, however, and were up by 3 percent for Fannie Mae and Freddie
Mac. Overall commercial/multifamily origination volume was projected to end 2018 at
or near 2017’s record level of $530 billion.
Demand for small commercial buildings wanes
Demand for leasing space in buildings under 50,000 square feet slowed this past third
quarter, according to the tracking company Boxwood Means. A severe shortage of
smaller commercial buildings was driving up rents and occupancy rates to record levels.
Companies have foregone or delayed expansions into new space, the company said.
A significant drop in demand for space across all major asset types posed a risk to core
fundamentals in the small-cap market, and could potentially slow the robust growth
in asset prices and sales volume, Boxwood Means said.
The multifamily sector has hit a peak
As of third-quarter 2018, the multifamily sector had beat expectations for the year,
but 2019 — in terms of origination volume and loan performance — could represent
the peak of the market. Analysts say the sector’s solid fundamentals, such as strong
rent growth and low vacancy rates, will likely continue into 2019, but growth is slowing.
Multifamily originations hit a record of $285 billion in 2017. The Mortgage Bankers
Association forecast that overall multifamily originations will rise to $302 billion in 2018
and then jump again by 2 percent in 2019.
GSE multifamily-lending caps stay the same
The government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac will
each once again be capped at $35 billion for multifamily lending in 2019. The Federal Housing Finance Agency (FHFA), the GSEs’ regulator, set the caps at the same level as in 2018.
The lending caps are based on FHFA’s projections of the overall size of the multifamily
market, which is expected to remain relatively flat in 2019. The GSEs have greatly
increased their financing activity in areas exempt from the lending cap, however,
including bankrolling an explosion in green-energy efficiency projects over the past
three years. n
By Victor Whitman
The mall-vacancy rate as of this past second
quarter, up from 8. 3 percent in
Source: Reis Inc.
The amount of industrial space absorbed
by companies over the first three quarters
of 2018, up 10. 5 percent compared to the
same period in 2017
Source: Cushman & Wakefield
The national average monthly rent per unit
for multifamily properties this past October,
up 3. 3 percent year over year
Source: Yardi Matrix