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Commercial Originations Show Signs of Strength

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Driven by big quarterly gains in hotel loan production and mortgages funded by conduits, the origination of commercial real estate loans jumped more than a third. While the year-over-year gain was much more moderate, industrial property lending nearly tripled from a year ago.

The origination of commercial real estate loans jumped 35 percent from the first quarter in the Mortgage Bankers Association’s second-quarter commercial mortgage survey. Production was 1 percent higher than in the second-quarter 2009.

Using MBA’s commercial mortgage data from 2008 along with the latest Commercial/Multifamily Mortgage Bankers Originations Index, second-quarter commercial mortgage production was around $26 billion, compared to the first quarter’s $19 billion and the second-quarter 2009’s $25 billion.

During all of 2009, commercial mortgage volume was around $90 billion, compared to $181.4 billion in 2008 and $507.7 billion in 2007.

The average size of a commercial real estate loan was $11.1 million during the second-quarter 2010, higher than $9.2 million in the prior quarter. But a year earlier, the average size was $11.8 million.

Compared to the first quarter, conduit production more than doubled, while originations by life insurance companies jumped 56 percent and fundings for Fannie Mae and Freddie Mac rose 21 percent. But commercial banks scaled back lending by around 2 percent.

Using the second-quarter 2009 as a comparison, conduit volume was up 175 percent and life insurers boosted activity by 149 percent. Fannie and Freddie’s volume, however, was down by more than half and commercial bank originations were 10 percent lower.

By property type — hotel loan production was nearly five times higher than in the first quarter. Mortgages for industrial properties more than doubled and office property fundings were up more than half. Multifamily was 37 percent higher, but retail property volume declined 12 percent.

Industrial mortgage production was 186 percent higher than a year earlier — the biggest jump of any property type. Office fundings closely followed, with a 175 percent gain, and hotel loan volume was 18 percent better. But multifamily was down a quarter and retail property financings were off 10 percent.

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