Real Estate-Backed Commercial Lending to Rise 13% in 2022, MBA Forecasts

Real estate-backed commercial lending showed sharp increases in the fourth quarter among all lenders, and among the 10 largest credit unions by assets.

In addition, the Mortgage Bankers Association on Monday also forecast total commercial and multifamily mortgage borrowing and lending is expected to break $1 trillion for the first time in 2022, a 13% increase from 2021’s estimated volume of $900 billion.

Jamie Woodwell, the MBA’s vice president of commercial real estate research, said commercial real estate lending volumes are closely tied to the values of the underlying properties, and last year they rose by more than 20%.

“Those increases will fuel further demand for mortgage debt in the coming years,” Woodwell said.

“Continued increases in property incomes, and stability in the ways investors value those incomes, should also support solid demand for mortgage capital, even in the face of modest increases in interest rates,” he said.

The MBA reported that commercial and multifamily mortgage loan originations were 79% higher in the fourth quarter of 2021 compared to a year ago, and up 44% from the third quarter.

Woodwell said both the fourth quarter and the year set records for borrowing and lending backed by commercial and multifamily properties.

“Part of the growth from 2020 was a bounce-back from the worst of the recession,” Woodwell said. “However, rebounding property fundamentals and strong valuations, record sales transaction volumes and low interest rates all fueled commercial and multifamily borrowing and lending activity that easily outpaced previous periods.”

Among the Top 10 credit unions, member commercial loans backed by real estate were $557.4 million in the fourth quarter, up 34.5% from a year earlier. For the year it was $3.5 billion, more than double the $1.4 billion in 2020.

The largest volumes and gains for the year were from:

• PenFed Credit Union, Tysons, Va. ($32.5 billion, 2.6 million members), which originated $1.5 billion, up 15-fold from $99 million in 2020.
• BECU, Tukwila, Wash. ($30.2 billion, 1.3 million members), which originated $605.2 million, up 32.4%.
• Alliant Credit Union, Chicago ($15.2 billion, 646,111 members), which originated $650.8 million, up 77.9%.
• First Tech Federal Credit Union, San Jose, Calif. ($14.9 billion, 657,642 members), which originated $417.4 million, up 118.9%.
• America First Federal Credit Union, Riverdale, Utah ($16.8 billion, 1.2 million members), which originated $277 million, up 85.5%.

The Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations showed the biggest factors in the year-to-year increase for the fourth quarter were gains in originations for hotel, office, industrial and retail properties.

The MBA’s forecast included multifamily lending to rise 5% to a record $493 billion this year. The MBA said it anticipates borrowing and lending to remain high in 2023, with slightly more than $1 trillion of total commercial real estate lending and $474 billion in multifamily lending.

The MBA revised its commercial real estate finance forecast this year to target total commercial real estate lending. In past years, the forecast targeted lending by dedicated commercial/multifamily lenders, which excluded mortgages made by many smaller and midsized depositories. The lending volumes in this year’s forecast included those institutions.