Commercial Real Estate Lending Continues to Rise with Markets Highly Liquid

Commercial real estate lending markets were highly liquid in Q4 2021 and the availability of debt capital continued to expand, according to the latest research from CBRE.

The CBRE Lending Momentum Index, which tracks the pace of CBRE-originated commercial loan closings in the U.S., increased by 10.3% quarter-over-quarter and is now 42% above its February 2020 pre-pandemic close. The index closed the year at a value of 415.



“Lending activity continued to rise in Q4 2021, reflecting the continued expansion of high levels of liquidity in the commercial mortgage market. Credit spreads on permanent loans remained tight, while underwriting standards were generally unchanged from the previous quarter,” said Brian Stoffers, Global President of Debt & Structured Finance for Capital Markets at CBRE.

CBRE’s lender survey indicates alternative lenders, such as debt funds and mortgage REITs, had the largest share of non-agency loan closings in Q4 2021 at 37.7%, down slightly from Q3 2021. The strong collateralized-loan-obligation (CLO) market helped support term-financing of loan portfolios. Overall CLO issuance totaled a record $45.4 billion in 2021. The Q1 2022 CLO deal pipeline remains active.

Banks were the second-most active lending group in Q4 2021, increasing their share of non-agency lending volume to 29%—up from 23.1% in Q3 2021 and 24.5% from a year earlier. Bridge loans accounted for 38.5% of banks’ total lending volume in Q4 2021, while permanent loans accounted for 35% and construction loans for 21%.

As loan pricing remained competitive, CMBS originations accounted for 18.5% of total lending in Q4 2021—up from 17.6% in Q3 2021 and 10.5% from a year ago. Industry-wide CMBS origination volume more than doubled year-over-year in 2021 to $110 billion.

Life companies’ share of commercial mortgage closings fell to 14.8% in Q4 2021 from 20.2% in Q3 2021, with origination activity mostly permanent loans on multifamily and industrial properties.

Indicators of loan underwriting criteria were mixed in Q4 2021. While the underwritten debt-service coverage ratio (DSCR) inched up and loan-to-value ratio (LTV) fell, cap rates and debt yields were lower. The percentage of loans carrying full or partial interest-only terms rose to 62.5%.

Government agency lending of multifamily assets reached $46.1 billion in Q4 2021, up from $34 billion in Q3 2021 and lifting the annual total to $139.6 billion—12% below 2020’s record production volume. 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 15 basis points (bps) in Q4 2021 and 56 bps from a year ago to average 3.28%.

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