Mark your calendars for the ultimate real estate experiences with Inman’s upcoming events! Dive into the future at Connect Miami, immerse in luxury at Luxury Connect, and converge with industry leaders at Inman Connect Las Vegas. Discover more and join the industry’s best at inman.com/events.
Borrowing for commercial and multifamily buildings fell off sharply on an annual basis during the fourth quarter of 2023 as investors remained wary about the risk-heavy sectors and interest rates remained high.
Commercial and multifamily loan originations fell 25 percent in the fourth quarter of 2023 compared to a year earlier but increased 13 percent from the previous quarter, a quarterly increase in line with usual seasonal trends, according to data released Monday by the Mortgage Banker’s Association.
When divided into property types though, the pain in the office real estate sector becomes more evident, with loans for office buildings dropping 68 percent year over year and 32 percent quarter over quarter.
“Borrowing and lending backed by commercial real estate remained subdued to close out 2023,” said Jamie Woodwell, the MBA’s head of commercial real estate research. “The fourth quarter saw a small pick-up from the previous quarter, as is usually the case, but was still down about 25 percent from 2022’s already suppressed fourth-quarter pace.”
For all of 2023, mortgage originations were 50 percent below 2022 levels, with every major property type experiencing a decline, according to the MBA.
The overall drop in commercial loan originations was led by decreases in loans for office, healthcare, multifamily and industrial properties when compared to the fourth quarter of 2022. The dollar volume of loans for office buildings dropped 68 percent year over year as office real estate remains unattractive due to the popularity of remote and hybrid work.
Dollar volume meanwhile dropped 39 percent for healthcare properties, 27 percent for multifamily properties and 7 percent for industrial properties.