In the wake of a number of positive forecasts regarding the commercial real estate market, outstanding mortgage debt increased throughout the sector during the first quarter.
The level of commercial and multifamily mortgage debt edged 0.3 percent higher in the first three months of 2012, according to a report from the Mortgage Bankers Association. This represented an $8.1 billion increase from the fourth quarter. Specifically, multifamily mortgage debt rose 0.8 percent to a total of $818 billion.
"The amount of commercial and multifamily mortgage debt outstanding increased during the first quarter, as lenders put out more in new loans than paid-off or paid down," said MBA vice president of commercial real estate research Jamie Woodwell. "Banks; Fannie Mae, Freddie Mac and FHA; and life insurance companies all increased their holdings of commercial and multifamily mortgages, more than offsetting declines among CMBS and other investor groups."
As a result of the increase, mortgage records indicate the total commercial and multifamily debt load topped $2.37 trillion, the report said.
In regard to which financial institutions held the largest share of this debt, commercial banks were at the top of the list during the first quarter with 34 percent of the total. Meanwhile, commercial mortgage-backed securities retained the second most at 24 percent, equaling nearly $575 billion.
Low commercial vacancy rates could spur a quicker recovery
Although there was a recent increase in the commercial and multifamily mortgage delinquencies, analysts from Keefe, Bruyette and Woods have high hopes for the future of the sector. The company recognized a decline in the commercial real estate vacancy rate in a number of major metropolitan areas so far in 2012. It's believed this occurrence could be a sign of an improving economy on a local level.
Specifically, Austin, Houston, Raleigh-Durham and San Francisco had the lowest commercial real estate vacancy levels in the country. In contrast, Detroit, Cleveland, Chicago, Los Angeles and Philadelphia ranked among the worst. While this was an indicator of current market events, KBW offered a future outlook as well.
The report in the coming months, commercial investors with portfolios based heavily in Boston, San Francisco, New York, North Carolina and Texas could benefit financially. These markets continue to provide safe investment opportunities because of their healthy economies and stable job growth.