Commercial property owners experienced a banner year in 2015 as net operating income (NOI) growth posted by the commercial properties backing CMBS loans jumped an average of 3.8% for the year, according to a news report from the CoStar Group.
The NOI growth is based on an early analysis by Wells Fargo Securities of more than 6,000 loans in conduit CMBS transactions through February 2016, CoStar said.
The Wells Fargo analysis indicated the increase for 2015 was significant in comparison with 2.66% in 2014 and 2.64% in 2013, according to the news report. Although the results are preliminary, Wells Fargo cautioned, the rate would be the greatest change since the financial crisis in 2007, exceeding 2012’s increase of 3.4% in the annual NOI average, CoStar reported.
Commercial property owners that profited most were hotel, self-storage and multifamily properties backing CMBS loans, according to CoStar. The Wells Fargo analysis showed those three profit centers drove average NOI increases of 8.6%, 8.5% and 7%, respectively, the report said.
The CoStar Group also examined 2015 NOIs reported for multifamily loans securitized by Freddie Mac and Fannie Mae in a separate analysis from the Wells Fargo analysis, finding that the multifamily sector also was performing well for the year.
CoStar said that Fannie Mae DUS loans backing more than 98,000 apartment units reported NOIs up 5.22% in 2015 over the previous year. NOI averaged about $6,870/unit for the year, as compared to $6,529/unit in 2014. NOI declines were reported on 27% of the units in 2015.
On the Freddie Mac side, CoStar reported loans backing more than 70,000 apartment units reported NOIs up 4.72% over the previous year. NOI averaged about $11,822/unit for the year as compared to $11,288/unit in 2014. NOI declines were reported on only 11% of the units in 2015.
In conduit CMBS deals, the CoStar analysis found office properties posted a “modest-but-improved” NOI average growth rate of 2.8% for 2015. That result was almost three times the less-than-1% average annual NOI growth rate office properties experienced in 2014, CoStar reported.
Wells Fargo reported that industrial properties were up 3.7% up from 2.5% in 2014, another “modest-but-improved” growth rate, according to CoStar.
Despite being among the commercial property owners that profited most in 2015, hotel properties experienced slowing NOI growth following 2014’s NOI growth spike, CoStar said. Hotel properties saw an average of 8.6% in annual NOI growth in 2015, a drop from 2014’s 10.9% growth rate, CoStar said quoting the Wells Fargo analysis.
Retail was the only other major property category to experience a slowdown in average NOI growth, posting an average increase of 1.7% in 2015, compared with 1.9% for 2014, the report said.
CoStar also reported that Wells Fargo found properties backing loans made during the last peak year vintages of 2006 and 2007 are posting NOI growth of 5.1% and 3.1% on average for the year 2015.
Wells Fargo said the 2015 results were “a welcome sign” that could help to refinance loans reaching maturity, according to the CoStar report.
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