CBRE’s quarterly lending momentum report, which was published this week, underpins a persistent positive outlook for the real estate debt markets – despite geopolitical and economic headwinds.
The report also highlights an uptick in the number of collateralised loan obligations recorded in Q1 2022 compared to the same period last year, a metric that demonstrates that alternative lenders are taking the lead when it comes to the amount of non-agency loan closings.
The CBRE Lending Momentum Index, which tracks the pace of CBRE-originated commercial loan closings in the US, increased by 69 percent year-over-year and 5.5 percent quarter-over-quarter. It is now 50 percent above its February 2020 pre-pandemic close.
“Lending activity continued to rise in Q1 2022, despite rising inflation, increased interest rates and the war in Ukraine,” said Brian Stoffers, global president of debt and structured finance for capital markets. “Following a strong start to the quarter, some lenders initially paused during the early onset of the war as credit spreads and loan indexes widened with the uncertainty. Many are very active again, quoting with generally wider spreads in line with corporate bonds.”
The firm also found collateralised loan obligations recorded $15.2 billion in new issuance in Q1 2022, up from $8.9 billion in Q1 2021; and that transactions involving alternative lenders were primarily floating rate multifamily bridge loans with an average term to maturity of 43 months.
A lender survey carried out by the Dallas-headquartered advisory revealed that alternative lenders, such as debt funds and mortgage REITs, had the largest share of non-agency loan closings in Q1 2022 at nearly 43 percent, up from 30 percent a year earlier.
In terms of activity, banks were shown to be the second-most active lending group, with 27.5 percent of loan closings. Bridge and construction loans accounted for two-thirds of bank financing, while permanent loans accounted for the remainder. The remaining amount of closed non-agency loans can be quantified as 26.3 percent by life companies, up from 19.2 percent a year ago; and CMBS conduit loans accounted for the remaining 3.5 percent, down from 11 percent a year ago.
Further findings include the fact that industry-wide CMBS issuance totalled $20.8 billion, double the amount of Q1 2021. Within that, the percentage of loans carrying interest-only terms increased to 68.3 percent in Q1 from 62.5 percent in Q4 2021. Government agency lending on multifamily assets totalled $30.9 billion in Q1 2022, down 12.9 percent from a year ago.
CBRE’s Agency Pricing Index, which reflects the average agency fixed mortgage rates for closed permanent loans with a seven- to 10-year term, increased by 20 basis points in Q1 2022 and 30bps from a year ago to average 3.48 percent.
This article first appeared in affiliate publication Real Estate Capital USA