The winner is commercial banks, which held $1.67 billion in commercial real estate debt at year-end 2014, according to data from the Federal Reserve Board. The amount of commercial real estate debt held by banks represents 49.5% of the $3.38 billion of total outstanding loans. CMBS is a distant second, with 12.6% of the commercial loan market, followed by insurance companies (10.9%), federal agencies (7.1%) and agency CMBS (5.1%). Of commercial real estate debt, 14.9% was categorized as Other.
The nation’s largest banks increased their holdings of commercial real estate loans by 6.6% in 2014, after adding 4.7% in 2013, which was the first substantial gain since the downturn. Meanwhile, loans in CMBS declined 1.2% as new originations did not keep pace with CMBS maturities. But the big year-over-year gainer was agency CMBS, with a healthy 16.5% increase in outstanding loans at year-end 2014. The loser for 2013 in addition to CMBS was federal agencies, primarily HUD multifamily programs, which saw a 1.1% decline in commercial loans outstanding.
Banks are expected to continue growing balances in 2015, as most of the problem loans from the 2008-2009 financial crises have been resolved, and with net interest margins compressing, banks need to grow their commercial loan balances to increase or even maintain earnings. For 2015, $125 billion in CMBS originations are forecasted, which should lead to some modest growth after subtracting maturing CMBS loans and troubled CMBS loans that are resolved and paid off. Federal agency loans will still be pressured by leaders in Washington, D.C. who want to reduce the involvement of government in commercial lending.
Overall Holders of Commercial Real Estate Debt on December 31, 2014
Source: Federal Reserve Board