But as of right now, that scenario is nowhere in sight.
Commercial and multifamily mortgage bankers are
expected to close a record $683 billion in loans backed by
income-producing properties in 2020; a 9% increase
from 2019’s anticipated record volume of $628 billion,
according to MBA.
Total multifamily lending alone, which includes loans
executed by small and midsize banks not captured in the
overall total, is forecast to rise 9% to $395 billion in 2020,
surpassing last year’s expected record total of $364 billion.
Indeed, for the first half of 2019, debt funds represented a larger share of the commercial mortgage mar-
kets than life insurance companies, according to Real
Capital Analytics. Specifically, it is within the riskier
investment styles where debt funds have been more competitive, allowing them to capture more market share
than insurance company lenders this year, the data
One effect of the active debt market is its calming
influence on prices. “Rather than test the waters in the
sale of an asset, investors can refinance assets in the
current market,” RCA notes in a post about its findings. The firm reports that the value of refinancings
represented 42% of the capital flowing into commercial real estate in the first half of 2019, versus a 38%
share for the acquisition of assets.
The conduit markets are flourishing as well. Domestic,
private-label CMBS issuance totaled $96.7 billion last
year, topping 2018’s volume by 27.1%—the heaviest year
of issuance since the Great Financial Crisis, according to
Trepp. The fourth quarter alone posted $38.5 billion of
issuance, or 40% of the year’s total.
Right now, there are few signs that this could change,
although it is far too soon to determine if 2020 will top
last year’s record. In a research note, Trepp points out
that the practice of securitizing loans has remained quite
profitable, with margins regularly topping 2% and often
“As long as the products [are] there, the CMBS or
conduit space for single assets, will be very attractive for
borrowers,” Gerard Sansosti, executive managing director and debt and loan sales platform leader for JLL, says.
CAUTION IN THE EQUITY SPACE
In general, Sansosti feels positive about the year ahead.
For the equity market specifically, however, he senses
hesitancy. “The equity market over the last couple years
has been a little more cautious,” he says.
Paul M. Fried, executive managing director and head
of equity capital markets for Greystone Co., agrees, stating that equity “remains risk-concerned” and will continue to migrate away from the commercial sectors perceived as having the most risk.
“It will stay along the same avenues that it did last year
with lots of [investment] in multifamily and urban office
and it will be careful around hotel and retail,” Fried says.
“And, of course, it will have an enormous appetite for
With the exception of student housing, which is see-
ing some issues with rising delinquencies, according to
As equity takes a harder look at its potential invest-
ments, there has also been a consolidation of investors,
fund allocators and sponsors since the financial crisis.
“RECENT YEARS HAVE SEEN A CONTINUED INCREASE IN THE AMOUNT
OF DEBT FUND FINANCING AVAILABLE TO BORROWERS, BUT THERE ARE
INDICATIONS THAT THIS COULD ACTUALLY SOMEWHAT SLOW IN 2020.”