October 10th, 2019
Commercial real estate lending activity gained traction in the second quarter of 2019, following a brief pause at the start of the year amid financial market volatility, according to the latest research from CBRE. The CBRE Lending Momentum Index, which tracks the pace of commercial loan closings in the U.S, reached a value of 244 in June, up 2.3% from March’s close. Compared with a year ago, lending growth is 20.8% above its June 2018 close.
CBRE Capital Markets’ Brian Stoffers says, “Our survey of life company lenders indicates that all are actively quoting deals and most have robust pipelines. These lenders are quoting both fixed- and floating-rate deals, with LTVs up to 65%. Many life companies are also providing higher LTVs on select deals through higher-yielding structured loan products.”
A separate report from The CRE Finance Council (CREFC) and Trepp, LLC released this week noted insurance companies reported continued strong performance and increased allocations to commercial mortgages during H2 2018. Commercial mortgage holdings averaged 12.06% of total invested assets for survey participants for the second half of 2018, a 34-basis point increase from year-end 2017. Individual company holdings ranged from a high of 18.52% to a low of 5.16% for H2 2018, compared to 18.39% and 4.00%, respectively at year-end 2017, indicating a higher allocation to CRE by the surveyed firms.
Insurance company loan portfolios continue to experience lower losses and perform better than commercial mortgage-backed securities (CMBS), but experienced slightly higher losses for the first time since 2011 when compared to commercial bank sector loans, says CREFC/Trepp.
CBRE’s lender survey indicated that life company lenders had another strong quarter in Q2 2019, accounting for 26% of non-agency commercial mortgage closings—up from 21% a year ago. Banks continued to lead the four major lender categories, accounting for 35% of loan closings.
Banks accounted for nearly 36% of volume in Q2 2019, down slightly from 39% in Q1 2019, and virtually even with a year ago, reports CBRE.