Brokers, Mortgage Bankers See Strong CRE Activity

Despite threats of a potential market slowdown on the horizon, investment sales brokers and mortgage bankers are confident deal activity will remain strong this year.

Berkadia’s Powerhouse Poll asked 150 investment sales brokers and mortgage bankers to assess expected commercial real estate activity and opportunities for the year ahead. More than 90 percent said they expect capital available for deals in 2020 will either increase or stay the same as last year. Nearly 80 percent of survey respondents said they expect the number of transactions this year will stay the same as last year or increase and 83 percent said the same about deal volume.

In addition, the Mortgage Bankers Association’s recent 2020 Commercial Real Estate Finance Outlook Survey found nearly two-thirds of top commercial/multifamily firms polled expect originations will increase this year, buoyed by low interest rates, strong property markets and rising property values. MBA Vice President Commercial Real Estate Research Jamie Woodwell said most commercial and multifamily mortgage originators anticipate “strong appetites from lenders and borrowers” and expect overall levels of mortgage borrowing and lending to increase.

Berkadia said new entrants are beginning to diversify the real estate investments within their long-term portfolios. It noted 85 percent of respondents agreed that institutional investors will likely show increased interest in commercial real estate investments this year.

Brokers and mortgage bankers predicted interest rates, the upcoming presidential election and housing finance reform will likely have the greatest effect on multifamily investment and financing this year, Berkadia said. While 89 percent of respondents agreed that ongoing government-sponsored enterprises reform discussions will change the way they do business this year, 91 percent said they expect the GSEs will once again be the biggest multifamily financiers in 2020.

“The continued uncertainty around GSE reform has paved a wide, prosperous road for institutional investors and other non-traditional lenders to enter our industry, creating overall strong deal volume and available capital throughout the market,” said Berkadia Executive Vice President and Head of Production Ernest Katai.

Nearly 90 percent of Berkadia’s respondents agreed affordable housing will affect the way the industry operates in the next year. Survey participants ranked the top three potential solutions to the affordable housing challenge as modifying tax credit policy (79 percent), local and state government intervention (63 percent) and regulatory changes for the GSEs (62 percent).

“Opportunity zones were investors’ major focus early last year, but more recently, these tax benefit programs have led investors to deeper conversations around the affordable housing crisis,” Katai said. “This year, with potential changes at both local and national levels, we will see investors dive deeper and seek out affordable housing projects in order to help underserved communities across the country.”