LOS ANGELES—Following the fifth consecutive year of increases in commercial real estate lending, the debt financing sector appears “well-positioned to take advantage of further growth in 2015,” says Brian Stoffers, global president, debt & structured finance with CBRE Capital Markets. “Lenders are showing enthusiasm for additional assignments in the upcoming months and are poised for higher production” in the current year.

Helping to underpin this expectation of higher production is the prospect of more demand for acquisition financing. Citing Real Capital Analytics data, CBRE says in a new report that property sales rose 17% in 2014. Already this year, investment sales volume was up 38% on a year-over-year basis from January and February of the year prior, says RCA.

In addition to more potential growth in acquisition activity, CBRE says loan maturities will begin to ramp up, as 10-year mortgages issued during the boom years of 2005-2007 come due. Mortgage Bankers Association projections show that scheduled nonbank commercial and multifamily maturities are expected to increase this year by more than $50 billion Y-O-Y.

“These loan maturities will create numerous refinancing requests over the next year,” according to CBRE's Lender Forum report. “However we remain reasonably confident that lenders will supply enough capital to absorb the higher levels of maturities. This could be more challenging, however, if there are market disruptions and interest rates rise sharply.”

Meanwhile, CBRE says, CMBS issuers predict that new issuance will increase to $125 billion in 2015, well over the $95 billion issued in '14 and $86 billion in 2013. CBRE says its discussions with life company lenders indicate that most companies have 2015 allocations that exceed their 2014 production by 5% to 10%. 'Most life company and CMBS lenders have teamed with mezzanine lenders that have aggressively raised capital over past years to provide incremental leverage and 'rescue' capital for more challenging refinance situations,” according to CBRE's report.

In the fourth quarter of '14, banks continued their strong run by capturing close to one-third of non-agency lending, ahead of life companies and CMBS conduit lenders. That being said, all three sources of capital remained poised to extend “higher levels of credit at very attractive rates” as this year got under way. Furthermore, the GSEs are likely to bump up against their volume targets for the year.

“However, as the lending recovery enters its sixth year, will markets continue to sail upward now that the potential storm clouds of short-term rate increases and credit demands due to rising mortgage maturities complicate borrowing markets?” the report asks. “While the ultimate direction of markets is often difficult to predict, it is apparent that both the supply and demand for commercial mortgages is currently on an upward track.”

Although loan underwriting trends remained relatively stable during Q4, with average debt service coverage ratios unchanged from Q3 at 1.52x, CBRE notes that the percentage of loans carrying either partial or full interest-only payments over the loan term jumped to 65% at year's end, after averaging close to 50% in the first three quarters of the year. “The increase raises concerns that underwriting standards will remain under pressure in the near term.”