According to an updated baseline forecast released by the Mortgage Bankers Association (MBA), total commercial and multifamily mortgage borrowing and lending is expected to rise to $576 billion in 2024, marking a 29% increase from 2023’s estimated total of $444 billion.
"2023 is likely to go into the record books as the slowest year for commercial real estate borrowing and lending in roughly a decade,” said Jamie Woodwell, MBA’s Head of Commercial Real Estate Research [1]. “As the markets reset–on interest rates, property values, some property fundamentals, and other factors–those volumes should pick up marginally. While up from last year’s levels, we still expect borrowing and lending in 2024 to be below what was seen going back to 2017.”
Multifamily lending alone (which is included in the total figures) is expected to rise to $339 billion this year–a 25% increase from last year’s estimate of $271 billion. MBA anticipates borrowing and lending next year will increase to $717 billion in total commercial real estate lending, with $404 billion of that total in multifamily lending.
“Commercial mortgage originations have historically followed property prices, and the uncertainty about the future path of interest rates has been a contributing factor to the current slowdown. If interest rates and cap rates were to fall, that should help boost values and promote borrowing. If they remain higher for longer, that will suppress activity. This uncertainty is a contributing factor in today’s slowdown,” added Woodwell.
In terms of delinquency rates for mortgages backed by commercial properties, these rates increased during Q4 of 2023, according to the Mortgage Bankers Association's (MBA) latest commercial real estate finance (CREF) Loan Performance Survey [2].
In Q4, 96.8% of outstanding loan balances were current or less than 30 days late at the end of the third quarter, down from 97.3% at the end of the third quarter of 2023. It was also reported that 6.5% of the balance of office property loan balances were 30 days or more days delinquent, up from 5.1% at the end of last quarter.
"Ongoing challenges in commercial real estate markets pushed the delinquency rate on CRE-backed loans higher in the final three months of 2023," said Woodwell. "Delinquency rates jumped to 6.5% of balances for loans backed by office properties, and to 6.1% for lodging-backed loans. Delinquencies for loans backed by retail properties remain elevated from the onset of the pandemic but were unchanged during the quarter. Delinquency rates for multifamily and industrial property loans both increased marginally but remain much lower.”
Fortune recently reported an uptick in the number of employees returning to the office [3], as WFHResearch [4] found that only 12.7% of full-time employees work from home full time, and according to Owl Labs [5], only 16% of companies across the globe are fully remote.
According to Resume Builder's survey [6] of 1,000 company decision-makers:
- Nine in 10 companies with office space will have returned to office by 2024
- A majority currently track or will track employees to ensure in-person attendance
- 72% of those polled said a return to office (RTO) has improved revenue
- 28% said their company will threaten to fire employees who don’t comply with RTO mandates
To assess the impact of the pandemic and RTO policies on commercial office spaces, Resume Builder also found [6] that 64% of respondents said their company currently has a physical workspace, while 20% plans to by the end of 2024, 11% plan to in 2025 or later, and just 4% never plan to have a physical workspace.