“The number of new lenders entering the market or existing lenders expanding their programs is extraordinary.”
Commercial real estate lending picked up major steam in the third quarter, in a trend that parallels a similar uptick in property acquisitions.
CBRE reports that the pace of closings of commercial loans it originated in the third quarter is up 31.6% over June figures and up 29.1% from February 2020. Its overall index is up by 135% over its pandemic low in September 2020.
The percentage of loans carrying full or partial interest-only terms exceeded 61%, and CBRE notes that underwritten cap rates and debt yields were lower.
“The number of new lenders entering the market or existing lenders expanding their programs is extraordinary. Capital chasing equity-like returns has found it more difficult to invest, and many have pivoted to high-yield debt strategies, such as real estate, that provide attractive risk-adjusted returns,” said Brian Stoffers, Global President of Debt & Structured Finance for Capital Markets at CBRE. “Lending on value-added assets remained strong in Q3, supporting debt funds and other alternative lenders’ leading share of non-agency commercial mortgage origination activity.”
US sales volume approached $180 billion in the third quarter, and some experts are saying Q4 is also poised to shatter records. Pricing is strong and increasing across all asset classes, particularly multifamily. In a recent analysis, Marcus & Millichap’s John Chang said “the current pricing [for multifamily] is substantiated by revenue growth, at least at a national level. In addition, there are numerous signs we are in a severe housing shortage that will fuel demand for apartments.”
Activity by alternative lenders like debt funds and mortgage REITs were the volume leaders in Q3, comprising 39% of all non-agency loan closings, followed by banks. Bridge loans accounted for almost 80% of alternative lender loan closings year-to-date.
CMBS loan origination activity also picked up steam in the third quarter and accounted for 17.6% of loan closings in Q3 2021, an increase over the prior quarter as well as year-over-year. Around $77.1 billion in CMBS loans have been issued so far this year, double 2020’s count.
Source: “CRE Lending Boomed In Q3“