U.S. Commercial Mortgage Volumes Uptick in Q2, Retail and Hotel Sectors Leading the Way

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In a sign that the commercial real estate market is improving, the Mortgage Bankers Association reported that commercial/multifamily mortgage origination volumes during the second quarter of 2012 were up 25% from second quarter 2011 levels, and up 39% from the first quarter of 2012. This data comes from MBA's Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.

"Commercial and multifamily mortgage lending and borrowing continued to pick up in the second quarter," says Jamie Woodwell, MBA's vice president of commercial real estate research. "Low interest rates and continued stabilization and growth in the commercial real estate markets are helping support new loan originations...," he says.

The 25 percent overall increase in commercial multifamily lending, when compared to the second quarter of 2011, was driven by increases in mortgages for retail and hotel properties. The increase included a 56% increase in the dollar volume of loans for retail properties, a 22 percent increase for hotel properties, a 19% increase for multifamily properties, a 15% increase for office properties and an 11% increase in healthcare property loans, according to the MBA. These gains make up for a 5% decrease in industrial property loans.

Lori Schneider, senior vice president at Marcus & Millichap in Ft. Lauderdale says that she isn't surprised at the recent rise in retail mortgage originations. Although Schneider says that she isn't seeing mortgages for new product, "there is a lot of refinancing--new debt for existing properties." Her clients aren't always getting financing on the terms they would like, but they are getting loans, she says.

For the last year or so, the majority of new sales were for single tenant properties, both new construction and existing buildings, says Schneider. "Some of those deals were done for cash and some had debt placed on them at the time of the sale," she says.

"In both single and multi-tenant retail properties, many buyers lately have closed using cash in order to secure the desired deal, but then refinanced post-closing," says Schneider. Sometimes on distressed multi-tenant buildings especially, buyers are using cash to buy properties, then stabilizing them and financing them later.