In the third quarter of 2011, the number of U.S. commercial property loans was the highest it has been since 2007, according to a recent report by the Mortgage Bankers Association. At the end of 2007, the Mortgage Bankers Association rating system ranked the number of commercial property loans at 275, and that number reached 138 by the end of September.
The recent increase in commercial real estate loans is 10 percent higher than the end of the second quarter, and 98 percent higher than this time last year. Sources said the desire for higher yield, low risk investment is among the reasons for the increase. Experts in the industry say that commercial property has performed well during the recession and credit crunch.
The increase is also due to increased lending by banks, government supported finance companies and insurance companies. The high rate of commercial property loans in 2007 was largely a result of commercial mortgage-backed securities, but the securities market suffered over the summer and has since decreased its position in the market.
Life insurance companies and federally backed Fannie Mae and Freddie Mac have entered the market where many commercial mortgage backed securities exited. Life insurance companies, in particular, are enjoying a place in the market that simply wouldn’t be possible if securities were performing better.
Sources said that Fannie Mae and Freddie Mac stepped up commercial property loan originations 47 percent from last year, while life insurance companies have increased loan originations by 61 percent. Commercial-banks have upped their originations 433 percent from last year.
Source: Businessweek, “U.S. Commercial-Property Lending Rises to Highest Since 2007,” John Gittelsohn, November 4, 2011.