Commercial and Multifamily Real Estate Loan Origination Statistics and Trends
In commercial real estate, loan origination typically includes each step of the lending process, from initial application to disbursement of funds. According to the Mortgage Bankers Association (MBA), total commercial loan origination was a record $573 billion in 2018, an approximate 8% increase from the $530 billion of commercial loans originated in 2017, itself an 8% jump from the $491 billion reported in 2016.
Overall, multifamily properties were issued the most commercial loans, with $266.4 billion in multifamily loans issued in 2018, up from $233.9 billion in 2017, and also up from $214 billion in 2016. In this article, we’ll review recent loan origination statistics from each of the major types of commercial and multifamily real estate lenders in the United States, including Fannie Mae, Freddie Mac, HUD/FHA multifamily, CMBS, life companies, banks, and more.
Affordable Housing Loans: $7.4 billion, up 9% from the $6.8 billion in Affordable Housing loans in closed in 2017.
Small Loans: $2.2 billion, a small decrease from the $2.3 billion in Small Loans closed in 2017, which itself is an increase of 21 percent from the $1.9 billion closed in 2016*
Seniors Housing: $2.3 billion, down from $5.5 billion, but still up from the $1.5 billion in 2016
Green Financing: $20.1 billion, down from $27.6 billion in 2017
Student Housing: $2.7 billion, down from $3.8 billion
Manufactured Housing Communities: $2.9 billion, an increase of 56 percent from $1.9 billion in 2017
For Fannie Mae, Small Loans consist of loans equal to or less than $3 million (nationwide), and equal to or less than $5 million or less in selected major markets, as well as projects with between 5-50 units.
Affordable Housing Loans: $8.1 billion, up 9% from the $6.8 billion Affordable Housing loans in closed in 2017
Small Loans: $8.3 billion, a small increase from the $7.8 billion in Small Balance Loans closed in 2017, which itself is an increase of 73% percent from the $4.5 billion closed in 2016*
Seniors Housing Loans: $4.1 billion in Seniors Housing Loans were closed in 2018 (including seniors apartments) up from the $3.6 billion in loans closed in 2017
Student Housing Loans: $2.5 billion, up from the $1.7 billion in loans closed in 2017
Manufactured Housing Community Loans: $1.8 billion, up from $1.1 billion in 2017
Green Advantage: $23.1 billion in Green Advantage financing, up from $17 billion in 2017 and $4.5 billion in 2016
*For Freddie Mac, Small Loans consist of loans equal to or less than $7.5 million.
HUD/FHA Multifamily Loans
In 2018, HUD multifamily lenders closed 908 loans, totaling $15.21 billion, a 0.2% decrease in overall volume from the 1,056 loans totaling $15.24 billion that were closed in 2017. Specific statistics include:
HUD 221(d)(4) Multifamily Construction/Substantial Rehabilitation Loans: $6.2 billion, up from $4.4 billion in 2017
HUD 223(f) Multifamily Purchase/Refinance Loans: $7.27 billion, down from $7.29 billion in 2017
HUD 223(a)(7) Multifamily Refinance Loans: $805 million, down from $2.55 billion in 2017
HUD 241(a) Multifamily Improvement Loans: $49.4 million, down from $49.7 in 2017
LIHTC Projects: $3.25 billion up from the $2.79 billion in 2017
In 2018, U.S. CMBS loan issuances totaled $76.9 billion, with a total of 2388 loans issued. This is down from the 2300 loans issued in 2017, which totaled $87.8 billion, meaning that the size of the average CMBS loan fell slightly. Total global CMBS volume was $82.9 billion in 2018, also down from $88.9 billion in 2017. CMBS volume is expected to stay static in 2019, though some analysts believe that it may fall slightly. First quarter 2019 CMBS issuances, however, are down 15% from the same time last year.
Life companies remain a strong source of lending, especially for class A commercial and multifamily properties in major MSAs. 2018 statistics are difficult to obtain, but, according to a report by the Mortgage Bankers Association, life companies issued $61.03 billion in CRE debt in 2017. According to the same report, life companies actually hold 14.7% of all outstanding CRE debt in the U.S., with $468 billion in overall outstanding debt (as of Q4 2017.)
Combined bank loan origination statistics for commercial real estate are also somewhat difficult to come by. Of the top 10 commercial real estate lenders of 2017/2018, seven were banks (including Wells Fargo, JP Morgan, and Keybank), while only three of the top 10 were non-bank lenders (Walker and Dunlop, CBRE, and Berkadia).
As of Q4 2017, banks held $1.264 trillion in outstanding commercial real estate loans, a little less than 40% of the $3.18 trillion in total outstanding CRE debt at that time. If we take 40% of the total CRE loans originated in 2018 ($530 billion), we can estimate that total bank loan originations were about $230 billion for that year. However, the true number is likely to be somewhat less than that, as banks have generally been slowing down CRE lending.
Debt funds, which generally consist of private equity firms, sovereign wealth funds, pension funds, and similar institutions, are growing as an alternative source of commercial real estate debt, especially due to their additional flexibility and ability to move more quickly than traditional lenders. In 2017, U.S. and North American debt funds originated $32.3 billion of debt, though not all of this is in the United States, as some of these debt funds are invested in CRE debt in other markets, such as Canada and Europe.
Putting Origination in Perspective: Commercial and Multifamily Industry Statistics
In order to put the above loan origination statistics in context, it may be beneficial to understand some core facts about the commercial and multifamily property sector. As of 2017, there were 20,830,586 rental apartment units in the United States, consisting of 684,000 properties with 5 or more units. Of those, 478,000 had between 5 to 24 units, 116,000 had between 24-49 units, 47,000 had between 5-99 units, and 43,000 properties had more than 100 units.
A 2012 survey by the Energy Information Administration determined that there were 5.6 million commercial buildings in the U.S., totaling 87 billion square feet of space. Since the last EIA survey in 2003, this is 14% improvement in the amount of buildings and a 21% increase in overall space. Only buildings larger than 1,000 sq. ft. that were 50% or more occupied by commercial space were counted.
Around 50% of all commercial buildings in the U.S. are less than or equal to 5,000 square feet in size or smaller, while almost 75% were less than or equal to 10,000 sq. ft. This means that there are about 2.8 million commercial buildings in the U.S. that are greater than 5,000 sq. ft. The median size of a commercial building size also happens to be 5,000 square feet, though the average building size is more than 15,000 feet. Overall, newer buildings are somewhat larger than older ones.