Decline in Commercial Originations Accelerates

Commercial production during the last quarter of 2008 tumbled 80 percent from a year earlier. By comparison, commercial volume during the fourth-quarter 2007 dropped 16 percent from the same quarter in 2006.

Fourth-quarter activity on hotel financing almost disappeared — tumbling 99 percent from the final quarter of 2007. Health-care property volume saw the smallest decline from 2007 among all property types: 47 percent. Originations for retail properties were down 82 percent, while office property business was down 72 percent, industrial originations were off more than three-quarters and multifamily lending dropped 62 percent.

Conduit transactions saw the steepest decline from the fourth-quarter 2007, at 98 percent. Fannie and Freddie activity fared the best with a 15 percent decline. Commercial banks funded 86 percent less, and life insurance volume was down 73 percent.

Fourth-quarter commercial fundings fell 53 percent from the third quarter, MBA said. Retail property production dropped three-quarters, while multifamily financings saw just a one-third decline and health-care activity was down only 35 percent. Mortgage originations for industrial properties were 68 percent lower, hotel volume was down two-thirds and office originations fell 63 percent.

Commercial mortgage volume during the fourth-quarter for Fannie Mae and Freddie Mac loans fell just 21 percent from the prior period, though life insurance originations were down 73 percent. Fourth-quarter conduit commercial production was down 60 percent from the prior period and commercial bank business was down 43 percent.

“Commercial and multifamily mortgage lending slowed to a trickle in the fourth quarter,” MBA commercial mortgage executive Jamie Woodwell said in the report. “Between the worsening economy and the continued credit crunch, lenders are extremely cautious.”