According to data released by the Mortgage Bankers Association (MBA), US banks and life insurance companies increased their investments in commercial real estate in 2012. Senior lenders are expected to be even more aggressive in 2013 in the mortgage lending and commercial mortgage-backed securities markets.
The MBA reported a seven per cent year-on-year drop in commercial/multifamily loans in the third quarter of 2012. For commercial banks, the numbers were much more encouraging. They reported an increase in origination volume of eight per cent. In the first nine months of the year, banks increased their lending volume by an impressive 44 per cent, according to the MBA.
A recent report by Marcus & Millichap Real Estate Investment Services claims that portfolio lenders have been doing more commercial real estate business in 2012 than the previous year.
Banks were responsible for over one-quarter of all commercial real estate loans closed in 2012 and life insurance companies held 18 per cent, according to the research.
Abe Bergman, the managing partner with Eastern Union Funding, said recently that savings banks are hungry for business now. In 2011, Eastern Union Funding closed about $700 million in transactions. In 2012, the numbers shot up to $1.2 billion and analysts are hoping that the upward trend continues this year.
Real estate buyers were anxious to complete transactions before the end of 2012 when anticipated changes to capital gains tax rules kicked in. This was one factor driving origination volumes up in the fourth quarter. Ultimately the tax changes were averted.
Life insurance companies closed approximately $55 billion in new commercial loans in 2012. This figure represents an increase of approximately 10 per cent over 2011. It is estimated that the number could increase to $60 billion in 2013 as the economy improves and alternate investment products, such as corporate bonds, continue to offer low yields.
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