Executive Summary

  • Commercial mortgage placement activity surged in Q3 2021, reflecting a vibrant property acquisitions market. Loan credit spreads remained tight, while loan underwriting eased slightly.
  • The CBRE Lending Momentum Index increased by 31.6% quarter-over-quarter and is now 29.1% above its February 2020 pre-pandemic close.
  • Lending on value-added assets remained strong in Q3, supporting debt funds and alternative lenders’ leading share of non-agency commercial mortgage origination activity.
  • CMBS loan origination activity gained pace, largely from increased single-asset/single-borrower (SASB) and collateralized loan obligation (CLO) issuance, lifting the sector’s share to its highest level since Q1 2020.
  • CBRE’s loan underwriting measures for Q3 were slightly more aggressive. Underwritten cap rates and debt yields were lower, while the percentage of loans carrying full or partial interest-only terms jumped above 61%.
  • Rising inflation contributed to a modest increase in the Treasury yield curve in recent weeks, especially for two-to 10-year issues. The benchmark 10-year bond reached a low of 1.24% in mid-August and recently closed at 1.54% on October 27.
  • Spreads on commercial and multifamily seven- to 10-year, 55%-to-65% loan-to-value (LTV) permanent loans widened slightly in Q3. Commercial spreads widened by 20 bps quarter-over-quarter to an average of 238 bps. Multifamily spreads widened by 2 bps to average 194 bps.
  • Multifamily agency loan production increased to $34 billion in Q3 from $24 billion in Q2. The FHFA increased its 2022 production caps by 10% to $78 billion for each agency.