Commercial real estate continues a strong performance. TheMortgage Bankers Association just released the Commercial/Multifamily DataBook for thesecond quarter of 2015, summarizing its latest research into trendsand conditions in the commercial mortgage industry.

As expected, the publication reveals the industry enjoyedcontinued economic growth throughout the second quarter of theyear. The seasonally adjusted annual growth rate for the USeconomy overall was marked at 3.9 percent, with job growth alsostrong at a seasonally adjusted 230,000 jobs per month.Specifically, MBA reported that mortgage originations increased by113% in the government-sponsored (Freddie Mac/Fannie Mae) sector while CMBS loanoriginations increased by 64%. The second quarter of 2015also marked the first time multifamily mortgage debt has surpassed$1trillion, growing at almost 10% a year. According to the FederalReserve Board, Credit quality was unchanged or improved in keydistricts, and delinquencies remain. Though low interest rates andgenerous terms for commercial real estate mortgages andconstruction loans were reported in Boston, credit standards werelargely unchanged in other Districts.

Good times are expected to continue according to the consensusforecast recently published by the Urban Land Institute(ULI). Though the survey of economists and analysts from36 leading real estate investment, advisory and research firmsyielded slightly less bullish results than the previous consensus,responses suggest continued economic expansion over the next threeyears, with improved CRE transaction volume, price appreciation andrental rates. Issuance of commercial mortgage-backed securities (CMBS)are forecast to continue to grow steadily throughout the next 3years, from $110 billion in 2015 to $130 billion in 2016 and to$140 billion in 2017. The consensus is supported by other sources.Jones Lang LaSalle, for example, reports thatoffice and industrial real estate are improving in most districts,though peaks may be approaching in office markets in San Francisco,Silicon Valley, Dallas, and a few others, and retail continues tolag general market. Likewise, more recent reports by the FederalReserve indicate strong real estate markets throughout the country.Construction lending, in particular, continuesto increase, though a lack of skilled labor continues to influenceupward movement of construction costs in many districts. Lead timesfor construction materials are also affecting market conditions.Turner Construction's Quarterly Building Cost Index reports anaverage construction cost annual increase of 4.52%, with the impactof labor and material cost increases partially offset by lowerenergy costs.

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Bill Tryon

As Director of Strategic Development, Bill Tryon focuses on advancing key risk management initiatives from an environmental, engineering and construction risk standpoint. Bill has a long track record of innovation, and hopes to educate the industry on best practices to control risks, reduce costs and create a competitive advantage. Through The Science of Real Estate forum, Bill will provide regular updates from across the CRE risk management world.