CBRE says commercial real estate lending slowed again in Q1

CBRE says commercial real estate lending slowed again in Q1

A slowdown in commercial real estate lending continued in the first quarter, due to stress in the banking system and financial market volatility, according to the latest research from CBRE.

The CBRE Lending Momentum Index, which tracks the pace of CBRE-originated commercial loan closings in the U.S., declined by 33% from the fourth quarter of 2022 and 53.5% when compared with the strong loan volume of a year earlier.

“The Federal Reserve’s commitment to reduce inflation with aggressive rate hikes continued to heighten market uncertainty through the first quarter. While plenty of debt capital remains available, increased borrowing costs coupled with credit tightening continues to put downward pressure on lending activity,” Rachel Vinson, President of Debt & Structured Finance, U.S. for Capital Markets at CBRE, said in a release. “Borrowers will continue to opt for shorter-term, fixed-rate debt with shortened call protection until volatility begins to normalize.” 

The report also traced trends in the four different sectors of lenders, including banks, life insurance companies, alternative lenders, and commercial mortgage backed securities (CMBS).

Despite some high-profile failures, banks had the largest share of CBRE’s non-agency loan closings for the fourth consecutive quarter at 41.1%—down from 58% in Q4 2022. This was driven by a diverse set of smaller local and regional banks, as well as credit unions. About one-third of bank loans were for construction projects, the majority of which were multifamily. The remainder was split between acquisition loans and refinancings.

Life companies were the second-most active lending group in Q1 2023 with 23% of closed non-agency loans—slightly above their Q4 2023 share. Loan closings in Q1 2023 included a high proportion of five-year deals, with an overall average loan-to-value ratio (LTV) of 52%.

Alternative lenders, such as debt funds and mortgage REITs, accounted for 20.2% of loan closings in Q1 2023, close to their Q4 2022 share. Higher spreads and interest rate cap costs created a challenging environment for financing floating-rate bridge loans. Collateralized loan obligation (CLO) issuance was limited to two deals totaling $1.1 billion in Q1 2023, compared with a total of $15.2 billion in Q1 2022.

CMBS conduit loans accounted for 15.7% of non-agency loan volume in Q1 2023—up from 2% in Q4 2022.  Industrywide CMBS origination volume was limited to $5.9 billion in Q1 2023, down from $29.1 billion in Q1 2022.


Originally Appeared Here

About Caroline Vega 228 Articles
Caroline Vega combines over a decade of digital strategy expertise with a deep passion for journalism, originating from her academic roots at Louisiana State University. As an editor based in New Orleans, she directs the editorial narrative at Commercial Lending News, where she crafts compelling content on commercial lending. Her unique approach weaves her background in finance and digital marketing into stories that not only inform but also drive industry conversations forward.