Commercial/Multifamily Mortgage Debt Up In Q2

Outstanding commercial and multifamily mortgage debt rose 1.5% in Q2 2021, an additional $60.7 billion, according to the Mortgage Bankers Association’s (MBA) latest Commercial/Multifamily Mortgage Debt Outstanding quarterly report.

Multifamily mortgage debt specifically increased $23.8 billion, or 1.4%, to $1.7 trillion from Q1. Total commercial and multifamily debt rose to $3.98 trillion.

“Strong demand from all of the major capital sources led to another increase in the amount of commercial and multifamily mortgage debt outstanding,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research.

“In line with the strength of apartment fundamentals and values, there was a solid increase in the amount of multifamily mortgage debt outstanding. Additionally, the increase in mortgage debt on other, non-multifamily commercial properties was the largest since 2007 – a sign of renewed interest in other property types.” 

The National Association of Realtors, however, reports the office market is still “weak” in “primary or gateway markets,” though there’s strength in the secondary cities. “Overall, the office market continues to see negative net absorption, rising vacancy rates, and lower asking rent in 2021 Q3 compared to one year ago,” the NAR reports.

Commercial banks hold the largest share at $1.5 trillion, or 38% of the total outstanding debt, followed by agency and GSE portfolios and MBS (22%, $871 billion). The third-largest share is held by life insurance companies (15%, $596 billion) and CMBS, CDO, and other ABS issues come in last (14%, $557 billion.)

Commercial banks increased their holdings the most in Q2, up $23.4 billion, or 1.6%. CMBS, CDO, and other ABS issues increased their holdings by $16.7 billion, 3.1%. Agency and GSE portfolios and MBS increased their holdings by $10.2 billion, 1.2%. Life insurance companies increased theirs by $8.7 billion, 1.5%.

The holdings of private pension funds decreased by 5.7%.

Here are some more highlights from the report:

  • The four largest investor groups are: banks and thrifts; federal agency and government sponsored enterprise (GSE) portfolios and mortgage-backed securities (MBS); life insurance companies; and commercial mortgage-backed securities (CMBS), collateralized debt obligation (CDO) and other asset backed securities (ABS) issues. 
  • The $23.8 billion increase in multifamily mortgage debt outstanding from the first quarter of 2021 represents a 1.4 percent increase.
  • For multifamily mortgage debt in particular:
    • Commercial banks increased their holdings by $10.0 billion
    • Life insurance companies increased by $2.5 billion
    • REITs saw the largest percentage increase in their holdings of multifamily mortgage debt, up $391 million, or 6%
    • Private pension funds saw the largest decline in their holdings of multifamily mortgage debt, down $65 million, or 12.5%
    •  Agency and GSE portfolios and MBS hold the largest share of total multifamily debt outstanding, 50%, at $871 billion
    • Banks and thrifts hold the second largest with $491 billion
    •  Life insurance companies hold $174 billion
    • State and local government hold $106 billion, 6%
    • CMBS, CDO and other ABS issues hold $53 billion
    • Nonfarm non-corporate businesses hold $20 billion