Mortgage Bankers Association Projects Commercial and Multifamily Borrowing to Decline 46% From 2022

According to an updated baseline forecast released on Thursday (10-19-23) by the Mortgage Bankers Association (MBA), total commercial and multifamily mortgage borrowing and lending is expected to fall to $442 billion this year. That would represent a 46% decline from $816 billion in 2022.

The MBA notes that multifamily lending alone (which is included in the total figure) is expected to fall to $285 billion this year—a 41% decline from 2022’s total of $480 billion. The MBA anticipates borrowing and lending next year will increase to $559 billion in total commercial real estate lending, with $339 billion of that total in multifamily lending.

Adding additional background and analysis to the report, MBA Head of Commercial Real Estate Research Jamie Woodwell said:

“The logjam in the commercial real estate markets that began last summer has remained firmly in place. Questions about supply and demand dynamics for some properties, the rise and volatility in interest rates, and the low number of transactions and coinciding lack of price discovery have all contributed to a marked decline in demand for new mortgages. Unfortunately, those and other factors will likely continue to exert downward pressure on borrowing and lending volumes in the coming quarters.

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, as is increasingly likely, that will suppress activity. This uncertainty is a contributing factor in today’s slowdown.”