Commercial nonresidential debt outstanding in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space — increased 5.4% in the past year and is just $14.4 billion shy of the last peak in 2008, according to the latest data from the Federal Reserve for the second quarter.
Commercial nonresidential debt in the U.S. and Philadelphia commercial real estate markets grew by $34.6 billion last quarter. At that pace, it is likely to surpass its pre-recession peak this quarter.
This report on national and Philadelphia commercial properties was made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
Multifamily residential debt has never really stopped growing — surpassing each previous year’s volume in seven of the last eight years. And it continues to rise at a double-digit pace, up 10.15% in the past year, according to the Fed.
Total commercial/multifamily debt outstanding rose 6.8% year over year to $3.707 trillion. Multifamily debt outstanding rose to $1.137 trillion, making up 31% of the total volume. Nonresidential debt outstanding rose to $2.571 trillion.
At its peak in 2008, the multifamily portion made up just 25% of outstanding CRE debt.
Government-sponsored enterprises Fannie Mae and Freddie Mac account for a huge amount of that growth. GSE-backed mortgage pools are now the third-largest holders of multifamily debt, growing their holdings 22.7% in the past year. They have more than doubled their holdings since 2008, surpassing private multifamily mortgage securities issuers.
“The amount of commercial and multifamily mortgage debt outstanding grew to a new record during the second quarter, despite a record drop in the balance of CMBS loans outstanding,” Jamie Woodwell, MBA’s vice president of commercial real estate research, reported in MBA’s analysis of outstanding debt among U.S. and Philadelphia commercial real estate properties. “The CMBS market is seeing far more loans paying off and paying down than new loans being originated.”
Private CMBS issuers continue to see their share of outstanding CRE debt in both national and Philadelphia commercial real estate listings shrink. Their total volume of multifamily debt shrunk 16.5% in the past year and now is 49% below their peak volume in 2008. The nonresidential debt outstanding shrunk 7% in the past year and total volume is 54% less.
U.S. REITs have also been shrinking their overall outstanding debt in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – with one distinction: nonresidential debt is down 8.8% from a year ago, but multifamily debt is up 4.3% from a year ago.
Government and private pension funds, too, have been avoiding debt investments with their combined holdings down 8.8% from a year ago.
U.S. banks and life insurance companies, the first and second-largest holders of CRE debt in both U.S. and Philadelphia commercial real estate listings, continue to increase their holdings of both, and more than make up for the declines of CMBS issuers, REITs and pension funds.
Banks surpassed their 2008 peak in 2015 and have grown their multifamily holdings 15.8% in the past year and their nonresidential assets 9.5%.
Life insurance companies have been growing their portfolios a little more evenly. Multifamily is up 10.1% in the past year and nonresidential is up 9.7%.
For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) Leor Hemo (leor.hemo@wolfcre.com) or Lee Fein (lee.fein@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.
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