Growth of multifamily, CRE loan debt shows strong interest in sector

Commercial and multifamily mortgage debt outstanding grew 1.3% in in the first quarter of 2019, aided by low mortgage rates and the steady incline of property values, according to the Mortgage Bankers Association.

The combined debt outstanding increased $45.4 billion in 2019's opening quarter, up from last year's growth of $44.3 billion, but down from the $68.5 billion jump in the fourth quarter of 2018. Commercial and multifamily mortgage originations are prone to seasonality, typically starting the year slow and then peaking during the fourth quarter.

"The commercial and multifamily mortgage market has been very strong in recent years — with low interest rates, solid fundamentals and increasing property values," Jamie Woodwell, the MBA's vice president of commercial real estate research, said in a statement to NMN. "All of that has been pushing mortgage debt outstanding higher, and largely remains in place today."

The collective debt total rose to $3.46 trillion. The multifamily segment climbed to $1.4 trillion, with an increase of $17.9 billion during the first quarter.

"Mortgage debt backed by commercial and multifamily income-producing properties continues to grow at a strong pace, with three of the four major capital sources — banks, life companies, and the GSEs and FHA — growing their holdings by more than 1% during the first quarter of 2019," Woodwell said in a press release.

Commercial banks and thrifts hold $1.4 trillion of commercial and multifamily mortgage debt, followed by the GSEs and federal agencies at $687 billion. Life insurers hold $532 billion, while securitizers hold $466 billion. The remaining $434 billion is held by others, including state and local government retirement funds and agencies.

"REITs, finance companies and nonfinancial corporate businesses also showed strong appetites last quarter, with each growing their holdings by more than $1 billion. The depth and breadth of growth among investors signals the interest in the sector," said Woodwell.