In the second quarter of 2024, the Mortgage Bankers Association (MBA) reported a 3% increase in commercial and multifamily borrowing compared to the previous quarter. This growth highlights a sustained demand for multifamily loans and certain commercial properties, even as the market grapples with higher interest rates.
The MBA credits favorable economic conditions and a strong market for bolstering demand in these segments. Multifamily properties, in particular, continue to attract significant investment due to stable occupancy rates and the ongoing need for rental housing across various markets.
Commercial properties also contributed to the growth, with some sectors showing resilience despite the higher cost of capital. Office spaces and retail properties, though facing challenges from shifts in work patterns and consumer behavior, are seeing selective investment, especially in regions with robust economic activity.
However, the MBA notes that the overall market environment remains mixed. Higher interest rates have tempered borrowing in some sectors, particularly in regions or property types that are more sensitive to financing costs. The ongoing balancing act between economic growth and interest rate pressures will likely continue to shape borrowing trends in the coming months.
Looking ahead, the MBA remains cautiously optimistic about the commercial and multifamily lending landscape. While challenges persist, the fundamental demand for housing and select commercial spaces is expected to sustain investment activity. Market participants are advised to stay informed and agile, adapting to shifting economic conditions and policy changes that could impact borrowing costs and investment returns.
According to CommercialEdge Blog, more than 1.2 billion square feet of office buildings (14.8% of total stock) are quality residential conversion candidates, according to a new tool that scores office buildings based on feasibility for conversion to multi-family. While San Francisco and Los Angeles have over 20% of their existing stock as solid candidates for residential conversions, another six markets stand above the national average, including Chicago and Miami. Meanwhile, under-construction office space totaled 73.8 million square feet nationwide, representing 1.1% of existing stock.
