Mortgage Bankers Association updated its baseline forecast for commercial borrowing and lending at its 2023 Commercial/Multifamily Finance Serving & Technology Conference in Chicago. The organization now expects lending to decrease to $654B in 2023, plummeting 20% from $816B in 2022. The slowdown in commercial real estate transactions and financing is believed to be caused by higher interest rates, uncertainty about property values, and doubts over the outlook for the cash flows of some properties. Lending activity for multifamily is forecasted to drop to $375B this year, decreasing 14% from $437B last year. MBA estimates commercial real estate lending and borrowing to rebound next year to $849B, with multifamily contributing $456B of that. Jamie Woodwell, head of commercial real estate research at MBA, predicted that the slowdown would likely persist through most of this year as investors, lenders, and others look for greater market transparency. Maturing loans are expected to break the logjam and provide more clarity as the year progresses. He added, "It may take until 2025 for volumes to get back to previous years' levels." In a report published earlier this month, CBRE said its Lending Momentum Index fell 33% QoQ and 53.5% YoY as stress in the banking system and financial market volatility created difficult lending conditions. Despite the recent bank failures, banks accounted for 41.1% of the Q1 loan volume and remained the top non-agency lending group. Around one-third of the bank loans were for new construction, and the remaining was split between acquisition loans and refinancing. The Wall Street Journal reported that delinquency rates for commercial real estate are at record lows today. Also, the loan-to-value ratios were lower than their values 15 years ago. However, many prominent borrowers like Brookfield, Blackstone, and RXR have defaulted on their loans.
Brookfield missed mortgage payments on many office properties in Washington D.C. and a $275M loan on the EY Plaza building in Los Angeles. Blackstone's two separate loans — a Manhattan office block and a residential building have gone into special servicing. Data from Trepp revealed that of the $7.7B worth of loans that have gone to special servicing, 25% are owed by big-name institutions. |
