MBA 4Q Commercial/Multifamily DataBook Reports Vacancy Rates, Asking Rents Up Slightly

Michael Tucker mtucker@mba.org

April 02, 2019


Commercial property vacancy rates generally ticked up during 2018, but so did asking rents, the Mortgage Bankers Association Fourth Quarter Commercial/Multifamily DataBook reported.

"New [commercial and multifamily] construction activity remained robust, with increases in the value of construction put-in-place for multifamily, office and lodging properties," said MBA Vice President of Commercial Real Estate Research Jamie Woodwell. "The value of other commercial properties put-in-place declined from a year earlier."

The DataBook summarizes major trends that developed during the quarter. Charts and tables provide historical information on commercial and multifamily real estate markets.

Woodwell said multifamily permits and starts remained especially strong, with the number of multifamily units under construction finishing the year at 601,000, "a level that has been relatively stable since mid-2016 and remains higher than other periods going back to the mid-1970s," he said.

The report said 2018 recorded the largest annual increase in commercial and multifamily mortgage debt outstanding since the Great Recession and the largest increase in multifamily mortgage debt on record. "The government-sponsored enterprises, life insurance companies, the commercial mortgage-backed securities market and banks all increased their holdings of commercial and multifamily mortgage debt during the year," Woodwell said.

Commercial and multifamily mortgages could hardly perform better than they have recently, Woodwell noted. "Future performance will be largely driven by changes in the economy and how they affect property incomes, property values and the ability of owners to refinance when their loans come due," he said. "Currently, all of those factors are favorable."

The report said commercial and multifamily property sales transactions rose in 2018, with $484 billion in sales of office, apartment, retail and industrial properties--up 14 percent from 2017 totals. Increased entity-level transactions drove the increase and pushed industrial property sales up 25 percent and retail properties up 32 percent. Sales of apartment properties increased 12 percent and office transactions rose 1 percent.

Property prices also increased during the year, the DataBook said. Green Street Advisors, Newport Beach, Calif., recorded a 1.9 percent increase in the value of properties owned by real estate investment trusts and Real Capital Analytics, New York, reported a 6.0 percent for all commercial properties. Cap rates remained a key contributor to the continued value increases, falling from a year earlier for apartment and office properties and holding steady for industrial and retail.

Last year ended on a strong note for commercial mortgage borrowing and lending, with fourth quarter originations 14 percent higher than a year earlier despite broader market volatility, the report said. Investor and lender interest in multifamily and industrial properties continued to drive transaction volumes while questions about retail and office property markets slowed activity for those property types.

An increase in late-year originations for healthcare, multifamily and industrial properties led the overall increase in commercial/multifamily lending volumes in the fourth quarter compared to the same quarter in 2017. The fourth quarter saw a 61 percent year-over-year increase in the dollar volume of loans for healthcare properties, a 32 percent increase for multifamily properties, a 28 percent increase for industrial properties and a slight increase (one percent) for retail properties. Originations decreased for hotel property loans (4 percent) and office property loans (3 percent).

Click here for a copy or to learn more about the Commercial/Multifamily DataBook.

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