Commercial and multifamily mortgage lending is expected to increase in 2017, as lenders’ appetites to place new loans and borrowers’ appetites to borrow both remain strong, according to a new Mortgage Bankers Association survey of the top commercial and multifamily mortgage origination firms. Nearly two-thirds (63 percent) of the top firms expect originations to increase in 2017, with one-quarter (26 percent) expecting an increase of 5 percent or more. Half expect their own firm’s originations to increase by 5 percent or more.
“Commercial mortgage bankers expect 2017 to carry-over much of the momentum from 2016,” MBA Vice President for Commercial Real Estate Research Jamie Woodwell said in a press release. “Most of the top firms expect strong demand from both lenders and borrowers in 2017, although not quite as strong as 2016. Originators generally see borrowing and lending volumes growing slightly, with just over half expecting potential regulatory and legislative changes to be positive for the market. The survey paints expectations of a strong, steady market in 2017.”
Specific findings include:
- Lenders remain eager to make loans – 96 percent of originators reported that in 2016 lenders had a “strong” or “very strong” appetite to make new loans and 77 percent expect lenders’ 2017 appetite to be “strong” or “very strong.”
- Borrowers are eager to take out loans – 80 percent of originators reported that in 2016 borrowers had a “strong” or “very strong” appetite to take out new loans and 69 percent expect borrowers’ 2017 appetite to be “strong” or “very strong.”
- Loan returns are expected to increase in 2017. Half of respondents characterized the loans made in 2016 as “somewhat” or “very low” return. Less than one-third (30 percent) expect loans to be “somewhat” or “very low” return in 2017.
- Loan risk is expected to increase slightly in 2017. More respondents characterized the loans made in 2016 as low risk than as high risk. In 2017, most respondents expect loans to be medium risk (53 percent).
- The majority of respondents (52 percent) expect potential regulatory and legislative changes could be positive for the market.
- Among the top reasons cited for positive impacts were potential changes to Dodd-Frank rules – particularly risk retention – and a more positive economic climate. Among the reasons cited for negative impacts were uncertainties that could be caused by changing rules.
The 2017 MBA CREF Outlook Survey was conducted between Dec. 2-22, 2016. The survey request was sent to leaders of 60 of the top commercial/multifamily mortgage origination firms, as determined by MBA’s 2016 Annual Origination Rankings Report.