CBRE: 1st Quarter CRE Lending Up 18%

Commercial real estate lending activity started 2019 strong as equity and debt markets were calmed by the Federal Reserve’s decision to hold firm on rates, reported CBRE, Los Angeles.

The CBRE Lending Momentum Index, which tracks commercial loan closings across the U.S., reached 239 in the first quarter, up 17.9 percent year-over-year.

“Despite recent volatility in the debt and equity markets, the Fed’s decision to leave borrowing costs unchanged has created a favorable commercial lending environment and activity has remained robust,” said CBRE Capital Markets Global President of Debt and Structured Finance Brian Stoffers, CMB (who also serves as Chairman-Elect of the Mortgage Bankers Association).

Stoffers noted the resulting relatively flat yield curve has given borrowers many options to consider between fixed- and floating-rate structures.

CBRE said banks maintained their strong origination pace in early 2019, just as they had in the previous quarter. Banks accounted for 39 percent of non-agency commercial mortgage closings, up from 25 percent a year ago and leading the four major lender categories.

Commercial mortgage-backed securities lenders held a 31 percent share of the market in first-quarter 2019, up from their 24 percent share a year ago. But CMBS issuance was down 15 percent from first-quarter 2018 and most market experts expect full-year 2019 issuance will fall short of 2018 volume.

Alternative lenders such as real estate investment trusts, finance companies and debt funds accounted for 14 percent of loan closings during the quarter, down from 20 percent a year ago. “Despite their reduced activity in the first quarter, these lenders should play a significant role in commercial real estate finance this year, particularly in the bridge and construction lending sectors,” Stoffers said.

Life companies accounted for only 16 percent of loan closings in the first quarter, down nearly 50 percent from a year ago. CBRE said competitive market conditions and a slowdown in refinances likely contributed to life companies’ shrinking share.

Underwriting metrics remained largely unchanged from late 2018, CBRE said. The percentage of loans carrying either partial or full interest-only terms equaled 67.5 percent, up slightly from 66 percent a year ago.