Total commercial and multifamily mortgage borrowing and lending is projected to plunge $700 billion this year – a 5% decline from an expected 2022 total of $740 billion. Multifamily lending alone is anticipated to fall $393 billion this year, down 11% from 2022’s expected total of $439 billion.
“Commercial real estate markets are entering 2023 amid a great deal of uncertainty and, as a result, a significant slowdown in activity,” Woodwell said. “Leaders of top commercial real estate finance firms believe that overall uncertainty will dissipate over the course of the year, but with a host of factors that will drag –rather than boost – the markets in 2023.”
Other findings of MBA’s CREF survey include:
- Every survey respondent considers today’s market either somewhat or very unsettled.
- Among property types, the office market is viewed as most negatively affecting today’s borrowing and lending markets, while a majority of respondents view the industrial market outlook as having positive impacts.
- Cap rates and valuations, base interest rates, and mortgage spreads are all viewed as having negative impacts on today’s financing activity.
- Originators expect the market to stabilize over the course of 2023.
- In 2023, lenders are expected to have a (slightly) stronger appetite to lend than borrowers will have to borrow.
- Borrowing and lending volumes are expected to decline in 2023.
- No capital sources are broadly expected to see increases.
- There are more deals looking for debt than there is debt looking for deals.
- Across a variety of factors affecting the markets, more are seen as negative than positive for 2023.
“Among the factors most viewed as negative by CRE leaders are office market fundamentals, short-term interest rates, inflation, long-term interest rates, the broader economy, and adjustable rate and short-term loans maturing in today’s market,” said Woodwell. “Industrial and apartment market fundamentals and changes in the severity of the COVID-19 pandemic are the only factors seen by more leaders as positive than negative for the market.”
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