The Mortgage Bankers Association’s Commercial/Multifamily Data Book for the second quarter showed continued strength in originations, particularly in the multifamily sector, with low and declining delinquency rates.
The report provides a summary of major trends during the quarter and detailed charts and tables providing historical information on the commercial/multifamily real estate markets. Among findings covered in second quarter Data Book:
• Commercial and multifamily mortgage originations were 25 percent higher from a year ago and 39 percent higher than during the first quarter.
• Commercial and multifamily mortgage debt outstanding decreased by $10.4 billion, or 0.4 percent, in the second quarter, as the balance of loans in commercial mortgage-backed securities, collateralized debt obligations and other asset-backed securities issues continued to decline.
• Commercial and multifamily delinquency rates for life companies, Fannie Mae and Freddie Mac all remain quite low and the delinquency rate for bank-held loans continues to decline. Loans in CMBS continued to show higher and more sustained aggregate delinquency rates, driven by the large share of these loans in foreclosure or REO.
“Commercial real estate markets continue to mirror the U.S. economy as a whole--exhibiting growth, but slow growth,” the Data Book said.
The report said commercial real estate fundamentals continue to follow the broader economy, with slow growth in employment, retail sales and other aspects of the economy continue to draw down--slightly--vacancy rates and to allow for some modest rent growth. The Data Book said office vacancy rates have fallen from 17.5 percent to 17.2 percent over the year and asking rents have increased by 2 percent. Retail vacancy rates have fallen from 11.0 percent to 10.8 percent and asking rents have remained flat.
As with the first quarter, the Data Book said multifamily apartments have been a positive, with strength in demand from renters continuing to draw down apartment vacancy rates (from 5.9 percent a year ago to 4.7 percent in the second quarter) and push apartment asking rents up by 3 percent over the year.
Correspondingly, the Data Book said construction activity has responded for multifamily properties, but less so for other property types. On a seasonally adjusted annual average, multifamily building permits were issued for 274,000 units in July--more than double the 121,000 issued in 2009 and getting closer to the 300,000 figure that was the norm for much of the mid 1990s and early 2000s. The value of construction put-in-place, however, remains near post-recession lows for most other commercial property types.
The Data Book reported commercial real estate sales rose by 13 percent higher from first quarter volumes, but were down 18 percent from a year ago. On a year-to-date basis, sales of apartment properties rose by 23 percent, office properties improved by 7 percent and industrial properties fell by 26 percent.
Average cap rates continued to compress during the quarter, with average cap rates for office properties falling from 7.2 percent to 7.1 percent; retail falling from 7.3 percent to 7.2 percent and industrial falling from 7.8 percent to 7.7 percent. Average apartment cap rates were stable at 6.2 percent.
The report said commercial and multifamily mortgage lending and borrowing continued to pick up in the second quarter. Commercial/multifamily mortgage origination volumes rose by 25 percent from a year ago and improved by 39 percent from the first quarter. Originations for commercial banks rose by 58 percent from a year ago. Originations increased by 50 percent for Fannie Mae and Freddie Mac, by 16 percent for CMBS conduits and by 10 percent for life insurance companies.
The Data Book also reported the level of commercial/multifamily mortgage debt outstanding decreased by $10.4 billion, or 0.4 percent, in the second quarter, as the balance of loans in CMBS, CDO and other ABS issues continued to decline. The $2.37 trillion in outstanding commercial/multifamily mortgage debt was $10.4 billion lower than the first quarter 2012 figure. Multifamily mortgage debt outstanding rose to $826 billion, an increase of $5.4 billion or 0.7 percent from the first quarter.
The report can be found at http://www.mortgagebankers.org/files/Research/DataBooks/2Q12QuarterlyDatabook.pdf.