Commercial Real Estate Debt Market Grows at Record Pace
Commercial mortgage debt outstanding rose 14.2% from the end of 2004, growing to $2.64 trillion at the end of 2005.
For the fourth quarter of 2005 alone, commercial and multifamily mortgage debt outstanding rose by $103 billion, or 4.1%, which is also a new record, the Mortgage Bankers Association reports based on data provided by the Federal Reserve.
Outstanding multifamily mortgage debt alone was at $674 billion at the end of 2005, representing a 10.2% increase for the year. And for the fourth quarter of 2005, multifamily debt outstanding was up $19 billion, or 2.9%.
"2005 was a strong year for commercial and multifamily real estate finance," noted Doug Duncan, the MBA's chief economist. "We saw record property sales, record mortgage origination levels and record levels of commercial/multifamily mortgage debt outstanding - all in an environment of strong loan performance and improving property fundamentals. With 2006 well underway, these trends show every sign of continuing."
Commercial banks hold $1.1 trillion of the commercial and multifamily mortgage debt outstanding, representing the largest share at 43% of the total (this also includes commercial loans that are backed by property pledged against loans to businesses, rather than by income-producing properties).
Commercial mortgage-backed securities pools hold $553 billion, or 21%, of the debt outstanding, followed by life insurance companies with $263 billion, or 10% of the total, and savings and loan institutions with $197 billion, or 8% of the total.
Fannie Mae, Freddie Mac and Ginnie Mae together hold $130 billion in multifamily loans that back the mortgage-backed securities they issue and another $65 billion in "whole loans" in their own portfolios. Taken together, these institutions hold a total 7% share of the debt outstanding.
Considering just multifamily mortgage debt outstanding, Fannie Mae, Freddie Mac and Ginnie Mae together hold the largest share, at 29%, of the debt outstanding, the MBA reports.
Commercial banks hold $140 billion of the multifamily mortgage debt outstanding, or 21% of the total; savings institutions hold $98 billion, or 15% of the total; and CMBS issuers hold $95 billion, or 14% of the total multifamily debt outstanding.
Over the one-year period from December 2004 to December 2005, commercial banks saw their holdings of commercial and multifamily debt outstanding go up $151 billion, or 15%, representing 46% of the total increase of $328 billion. CMBS issuers increased their holdings by $130 billion, or 31%, representing 40% of the increase.
Real estate investment trusts saw the biggest percentage-wise increase in their holdings of commercial and multifamily mortgage debt outstanding over the year, a 58% jump, the MBA reports. And private pension funds saw the biggest drop, with their holdings declining 2%.
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