Multifamily originations increased by more than 50% in the third quarter, contributing to robust lending activity across all of commercial real estate.
"After a slow start to the year, borrowing and lending backed by commercial real estate properties picked up during the third quarter," said Jamie Woodwell, MBA's head of commercial real estate research.
"Lower interest rates were a key driver of the increase," he noted. In the third quarter, 10-year Treasury yields, which influence borrowing rates, fell from a 4.31% average in June to 3.72% in September.
Elevated interest rates was one of the factors that led to subdued multifamily volume in 2023 and early 2024,
While the multifamily space saw a healthy pace of growth last quarter, it lagged behind other sectors, according to MBA's data. Between second and third quarters, originations in health care properties jumped by 191% and for retail, 56%. Office real estate, which has been negatively impacted since the pandemic with the adoption of
Meanwhile, industrial property originations increased 21% in dollar volume. The lone sector seeing a quarterly drop in volume was the hotel sector, where originations fell 25%.
Compared to the same quarter a year ago, lending for health care-related real estate accelerated by a whopping 510%. At the same time, originations for hotel, retail and industrial properties also saw significant increases of 99%, 82% and 57%, respectively. Office originations contracted by 3%.
"Each property and loan is unique and faces a different situation depending on its property type, market, submarket, vintage, business plan and more," Woodwell said. "All those factors will play a role in the volume of borrowing/lending in coming quarters."
Among investor types, the dollar volume of originations increased across the board when compared to both the previous quarter and year. Originations by government-sponsored enterprises Fannie Mae and Freddie Mac, who deal exclusively in multifamily lending within commercial real estate, expanded by 55% between second and third quarters. They were outpaced by loans for depositories, which grew 86%.
Meanwhile, origination volumes for life insurance companies and investor-driven lenders increased by 40% and 21%, respectively. Loans backed by commercial mortgage-backed securities saw 12% growth on a quarterly basis.
Year over year, Fannie Mae and Freddie Mac originations increased 28% but lagged all other investor categories. Originations backed by CMBS saw dollar volume leap 260% from the third quarter of 2023. Depository loans followed at 69%.
Meanwhile, investor-driven lender loans grew 62%, while dollar volumes at life insurance firms saw a 31% increase.