Commercial real estate debt markets are not expected to grow significantly for the next decade, with most of the new origination volume set to be absorbed by maturing loans.
With more than $814 billion of commercial and multifamily mortgages set to mature between 2009 and 2011, real estate data provider Foresight Analytics predicted there would be “minimal net growth” in the debt markets “during the next decade”.
In 2009 alone, an estimated $250 billion of commercial and multifamily mortgages will mature – an all-time high for the real estate debt industry.
That figure is set to climb though, as loans issued in 2006 and 2007 come due for repayment.
Between 2000 and 2007, $1.8 trillion of loans were originated in the US, with the most rapid growth taking place in 2005, 2006 and 2007. Debt origination peaked in 2007 with the issuance of $397 billion of commercial real estate loans.
Over the next two years, $594 billion of commercial real estate loans will mature on top of $220 billion of multifamily mortgages. Roughly half of that debt was originated during 2004 and 2008 – most it issued in 2004 and 2005.
Foresight partner Matthew Anderson said in the firm's commercial mortgage outlook report: “We estimate significant refinancing demand from the 2006 and 2007 boom year cohorts during the next several years. We are particularly concerned about the ability of these properties to qualify for refinancing in an environment with lower valuations and lower loan-to-value rations.”
However, the Oakland, California-based firm said 2011 would be a “pivotal” year. “If values have rebounded sufficiently by then, the market could avoid widespread defaults. But if the market is still depressed, a significant amount of these maturities could go into default.”