Most Commercial Lenders in U.S. Expect Originations to Increase in 2019

According to the Mortgage Bankers Association's newly released 2019 Commercial Real Estate Finance Outlook Survey, commercial and multifamily mortgage originators in the U.S. expect 2019 to be another strong year in lending activity.

More than half of the top commercial/multifamily firms (55 percent) expect originations to increase in 2019, with one-in-eight (13 percent) expecting an overall increase of 5 percent or more across the entire market. When forecasting just their own firm's originations, nearly two-in-five (38 percent) expect to see an increase of 5 percent or more in 2019.

"Mortgage bankers look to 2019 as another strong year for the commercial and multifamily mortgage markets," said Jamie Woodwell, MBA's Vice President of Research and Economics. "The majority of top firms expect that 'strong' appetites from both lenders and borrowers will drive commercial mortgage originations higher. A number of factors - including long-term interest rates, new construction activity, and the broader economy - are seen by a majority of originators as potentially somewhat negative to the markets in 2019, helping to explain the slight downshift in expectations this year compared to 2018."

Added Woodwell, "Even so, only two-in-five expect commercial and multifamily mortgage originations to slow this year, and only one-in-twenty expect their own firm's loan volume to decline."

Other MBA 2019 CREF Outlook Survey Highlights Include:

• Lenders remain eager to make loans: All surveyed originators reported that in 2018, lenders had a "strong" or "very strong" appetite to make new loans, and all expect lenders' appetite this year to be "strong" or "very strong."

• Borrowers are still eager to take out loans: Eighty-eight percent of originators reported that borrowers had "strong" or "very strong" appetites to take out new loans last year, and 78 percent expect borrowers' appetites this year to be "strong" or "very strong."

• Nearly all originators (97 percent) reported their own firm had a "strong" or "very strong" appetite to make new loans last year. A similar share (91 percent) expect their own firm's appetite to be "strong" or "very strong" in 2019. 

• A majority of originators expect the market to grow in 2019 (and their own firms to grow more quickly), with 13 percent expecting total market originations to increase 5 percent or more. Nearly 40 percent expect their own originations to increase by 5 percent or more.

• There is a wide range of opinions about how origination volumes for specific capital sources will change in 2019. Respondents are generally split about whether to expect an increase or decrease in originations for commercial mortgage-backed securities and Fannie Mae/Freddie Mac. More expect growth than declines in originations for bank portfolios (7 percent anticipate growth greater than 5%), FHA loans (12 percent anticipate growth greater than 5%) and life and pension companies (7 percent anticipate growth greater than 5%).  The greatest growth is expected from alternative lenders such as mortgage REITs and debt funds (49 percent anticipate growth greater than 5%).

• Loan returns are expected to remain muted and risks are expected to increase slightly in 2019.

• Strong majorities of originators expect 10-year Treasury rates, office capitalization rates and retail cap rates to rise. Most also expect apartment cap rates to rise and industrial cap rates to remain flat.

• Majorities of firms also expect long-term interest rates, new construction activity and the broader economy to have potentially negative impacts on the markets. Majorities expect short-term interest rates, a move away from LIBOR, and regulatory and legislative changes to have little potential impact in the year ahead.