Outlook for Commercial Mortgages Turns Positive in Q2 2021

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Amid continuing industry concerns, growing commercial and multi-family mortgage activity improves the market outlook for next year, according to CRE’s Financial Council.

The group’s sentiment index hit its highest level, 119.2 in the second quarter, compared to 118.7 in the first quarter and 84.4 a year ago. The survey began with a benchmark of 100 in the fourth quarter of 2017.

A high 83% of Governing Council members in the survey felt positive about CRE’s activities over the next 12 months, increasing from 72% per quarter and 21% per year . At the same time, 58% expressed positivity towards the surrounding CRE environment next year, roughly even with 59% of 1T while almost quadrupling the 15% from the previous year.

88% of those surveyed said their business loan programs were operating at full capacity, with 7% partially operational and 5% not accepting any new businesses. These went from 71%, 24% and 6% in the first quarter and from 34%, 54% and 11% year-on-year. In addition, 31% said they saw more transaction volume in the second quarter than before the start of the pandemic.

Other industry analyzes are aligned with the increasingly positive image. The The Mortgage Bankers Association plans that commercial and multi-family loans would reach $ 486 billion in 2021 and $ 539 billion in 2022 after 2020 reported $ 440 billion.

“As restrictions are lifted in states across the country and the economy reopens, we hope for a strong recovery with investors keen to pull out,” Lisa Pendergast, executive director of CREFC, said in a press release.

However, a growing negative outlook surrounds government policy and regulations. A share of 30% anticipates CRE funding restriction policies in the next 12 months, compared to 13% quarterly and 15% annually. Any changes including a LIBOR transition, reform government-subsidized businesses, and alignment with the Community Reinvestment Act or increased environmental, social and governance requirements could discourage investment.

“For example, an exchange of similar real estate under Section 1031 allows borrowers to defer tax accounting when selling a property to purchase a similar property. Deferred tax treatment is a major driver of transactions and its disruption could put more strain on the CRE industry as it attempts to recover from the pandemic, ”a CREFC representative told NMN.

Although all segments of CRE are not held in the same way. The classified professional association retail businesses as the most worrying in the aftermath of the coronavirus, followed by offices and hotels. The slightest concerns abound for the industrial sector, with multifamily to come.

“Retail and hospitality remain the most stressed in the economic wake of the pandemic, and the survey indicated concerns about office performance after COVIDSaid Eric Thompson, President-elect of the Board of Governors of CREFC. “However, foreclosure and REO assets have remained relatively low, and at levels well below those expected at the start of the crisis. “

Concerns about CRE’s over-indebtedness seem to have faded since the start of the pandemic. The latest poll results showed 90% believe commercial loans will do better than exit the 2008 global financial crash and 5% worse, down from 91% and 9% in the first quarter and 31% and 54% in June. 2020.


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