Lending Momentum Index Jumps 20.8% YOY

CBRE, Los Angeles, reported commercial real estate lending activity gained traction in the second quarter following an earlier brief pause amid financial market volatility.

The CBRE Lending Momentum Index, which tracks the pace of commercial loan closings in the U.S, reached 244 in June–up 2.3 percent from March’s close. Lending growth is now 20.8 percent above its June 2018 close.

The lender survey found banks continued to lead the four major lender categories, accounting for 35 percent of loan closings. Banks accounted for 39 percent of closings in the first quarter.

“Banks remain active in quoting shorter-term floating- and fixed-rate deals, with some banks actively quoting seven- to 10-year deals,” the report said.

Life company lenders also had a strong quarter, accounting for more than a quarter of non-agency commercial mortgage closings compared to 21 percent a year ago.

“Our survey of life company lenders indicates that all are actively quoting deals and most have robust pipelines,” said Brian Stoffers, CMB, Mortgage Bankers Association Chairman-Elect and Global President of Debt and Structured Finance for CBRE Capital Markets. “These lenders are quoting both fixed- and floating-rate deals, with LTVs up to 65 percent.”

Stoffers noted many life companies are providing higher LTVs on select deals through higher-yielding structured loan products.

Alternative lenders including real estate investment trusts, finance companies and debt funds had a 26 percent market share in the quarter; lower than a year ago but up 12 percentage points from early in the year, CBRE said.

After a strong start to the year, the commercial mortgage-backed securities conduit market’s share dipped to 13 percent in the second quarter, CBRE reported. Many market participants said they expect CMBS volume to stabilize in the second half of 2019, as spreads likely will remain stable or tighten slightly.

Underwriting on loans CBRE tracks was slightly more conservative in the second quarter than in the first, with increases in underwritten cap rates and debt yields. The percentage of loans carrying either partial or full interest-only terms fell below the 60 percent mark for the first time in nearly two years, the report said.