The commercial real estate industry didn’t lack financing activity over the last fiscal year, despite concerns about the direction of the overall economy and a few interest-rate increases over that time. Instead, 2018 was a record fiscal year for origination of commercial and multifamily loans, hitting $574 billion in transactions, according to the Mortgage Bankers Association Commercial/Multifamily Annual Origination Volume Summation report.
That record number was a nearly eight-percent increase from 2017’s numbers, according to breakdown of the survey by Trepp. The largest lending group, making up 30 percent of the originations, was made up of commercial bank and savings institutions. They were followed by the GSEs (Fannie Mae and Freddie Mac), at 25 percent; life-insurance funds, at 15 percent; and CMBS, CDOs (collateralized debt obligation) and ABS (asset-backed security) lenders all made up 17 percent.
Trepp noted that issuance of CMBS and CLOs (collateralized loan obligations), by contrast to overall numbers, fell from 2017, by 11 percent, totaling $84.6 billion.
By property sector in the overall lending universe, multifamily led in originations, with $266.4 billion, or 46 percent of all asset types. Office was at $103 billion, or 18 percent; while hotels, industrial and retail each accounted for eight percent.
One area in which lending has lacked from pre-Great Recession years is in the speculative-construction space, understandably, due to fears of over building. However, it is strong in both industrial and single-family rental development, reports National Real Estate Investor.
In industrial, overbuilding fears are allayed due to the never-ending appetite for space demand by e-commerce tenants, giving landlords plenty of opportunities to quickly lease up to third-party logistics firms and other associated tenants. The single-family rental market being treated more like multifamily by lenders, which makes sense, given that a lot of renters may want to purchase homes but are hindered by a challenging housing market.
Meanwhile, Trepp recently reported the five largest CMBS loan losses in June. Of the $177.5 million in June write offs, office properties were the most challenged, totaling $70 million, while mixed-use assets followed, with $47.7 million.
The largest loss was for 777 Scudders Mill Road, an office complex in Plainsboro, N.J., at $47.7 million. It was formerly the headquarters of Bristol-Myers Squibb, which relocated to a newly constructed office building in Lawrenceville.
The mixed-use Northwood Centre, in Tallahassee, Fla., followed, with a $46.2 million write off. The retail-office complex ran into trouble when the State of Florida, its largest tenant, deemed the building uninhabitable due to mold and air-quality issues. The City of Tallahassee purchased it at auction and has plans to repurpose the asset.
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