Filip De Mott Feb 13, 2024, 1:51 PM CST
- Mortgage originations in commercial real estate fell 47% through 2023, Mortgage Bankers Association said.
- Every sector experienced a pullback, with healthcare and office properties leading the decline.
- The industry is undergoing low confidence as high interest rates raise borrowing costs.
“2023 is likely to go into the record books as the slowest year for commercial real estate borrowing and lending in roughly a decade,” MBA Head of Commercial Real Estate Research Jamie Woodwell said in January’s report.
It wasn’t all downhill in 2023, with originations rising 13% between the third and fourth quarters, MBA reported on Monday. Still, dollar volume of loans dropped year-over-year, declining 68% for offices, 39% for healthcare properties, and 27% for the multifamily sector.
However, mortgage originations typically move in line with property prices, Woodwell previously explained, and looser central bank policy this year could provide a boost.
But such optimism isn’t widespread. Given current headwinds, the office sector alone faces a 30% peak-to-trough correction, Morgan Stanley recently predicted.
Others expect a peak-to-trough decline of 20% to hit the broader market, with $2.2 trillion in commercial debt set to mature in the next three years. The debt wall has prompted concern over a wave of defaults yet to come.