Bankers: Commercial and multi-family loans down 47%, but up from second quarter
- Commercial and multi-family loan origination fell 47% in the third quarter of 2020 from a year ago, even though they rebounded 12% from the lowest impacts of the coronavirus pandemic, according to new figures released by the Mortgage Bankers Association.
- Some sectors have been hit harder than others, with hotel properties registering a 94% year-over-year drop in lending volumes from a year ago. Relative positives included industrial properties, which fell only 23% amid continued activity for data center development, and a 31% decline for multi-family properties.
- “Borrowings and loans backed by commercial and multi-family mortgages remained weak during the third quarter,” said Jamie Woodwell, vice president of commercial real estate research at MBA, in a report. “All major property types and sources of capital were down from the third quarter of last year. Buildings supported by industrial and multi-family properties saw smaller declines than other property types, loans multi-family families being supported by loans to Fannie Mae, Freddie Mac and FHA. “
While observers have said money for development was abundantly available During the third quarter, the overall decline in loan volume illustrates the reluctance of developers in multiple industries to take risks on new projects during the uncertainty of the COVID-19 pandemic.
Indeed, several multi-billion dollar projects already underway have decided to stop construction until more clarity regarding the pandemic emerges.
But while year-over-year numbers show the severity of the negative impacts of the current development environment, shorter timelines give hope that some developers are stepping off the sidelines.
For example, third-quarter assemblies for industrial properties increased 67% from the second quarter, while the office sector increased 35%. At the same time, the retail and hospitality sectors continued to decline, by 27% and 45% respectively. Overall, lending is down 35% across all sectors since the start of the year.
This chart shows year-over-year, quarterly sequential and cumulative comparisons of loans by sector:
Trends in loan origination by sector, 2020
|Sector||year after year||T2 to T3||YTD|
SOURCE: Association of Mortgage Bankers