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Commercial Activity Tumbles

Commercial Activity TumblesMBA survey says 3rd quarter down 30 percent

November 15, 2007


Led by a big decline in hotel financing, quarterly commercial mortgage originations were off by nearly a third. Fundings through securitizations were also way down. But a growing number of baby boomers apparently sent health care property deals soaring.

Third quarter commercial mortgage originations fell 30 percent from the second quarter, according to the Mortgage Bankers Association quarterly survey of commercial mortgage bankers. Commercial production was down just 4 percent from a year earlier.

“In addition to the impact of the credit crunch, it’s also important to remember that previous periods included large volumes of originations spawned by large portfolio sales (and re-sales) and the privatizations of numerous REITs,” MBA Senior Director of Commercial/Multifamily Research said in the report. “These transactions fueled higher origination volumes in previous periods and augment the differences between those periods and the current one.”

The average loan size during the latest period was $13.3 million, off from $15.6 million in the second quarter and $13.6 million in the third quarter 2006, the report said.

Multifamily activity fell 10 percent from the second quarter but was up 14 percent from the same period in 2006, MBA noted. The average multifamily loan size was $11.8 million.

Office building financing fell 37 percent from the prior quarter, while retail dropped 42 percent and industrial was down 13 percent. Hotel deals tumbled 72 percent, the report said.

Health care property mortgage production, however, more than doubled — reportedly up 136 percent.

Fundings by commercial mortgage-backed securities conduits saw a steep decline — down 66 percent from the second quarter, according to the data.

Commercial mortgage fundings at commercial banks and life insurance companies, however, saw respective quarterly gains of 9 percent and 27 percent, MBA added. Activity at government sponsored enterprises was flat compared to the prior quarter and the prior year.

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