The U.S. economy continued its strong rate of growth during the second quarter and commercial real estate fundamentals are beginning to bounce back, according to Mortgage Bankers Association’s latest research, Q2 2021 Commercial/Multifamily DataBook.
MBA research shows commercial property sales bounced back robustly in the second quarter.
A total of $122 billion of apartment, industrial, office and retail properties (with prices above $2.5 million) traded hands in the second quarter, more than two-and-a-half times the volume a year earlier.
”That $122 billion of sales roughly equaled the $123 billion traded pre-pandemic in Q2 2019. Multifamily ($53 billion) and industrial ($30 billion) were the drivers of the activity, but office ($26 billion) and retail ($14 billion) were far closer to prepandemic levels ($37 billion and $17 billion respectively) than we have seen since March 2020,” said in the research.
Despte drops in incomes for many properties, values have generally held steady and/or improved markedly, according to MBA.
”Matching the general hierarchy in the market today, apartment values are up 15% year-over-year, industrial up 14%, retail up 12% and office up 11%. Similar to other indicators, this is not simply a story of a recovery from pandemic-induced declines. Overall property values have climbed 17% from August 2019, and never declined on a year-over-year basis during the pandemic.”
Meanwhile, delinquency rates for mortgages backed by commercial and multifamily properties have broadly improved in recent months as the economy continues to heal from the pandemic.
Performance is still property-type dependent, with the properties that saw the most immediate and dramatic impacts from the pandemic – lodging and retail – still experiencing considerably more stress than others but showing improvement.
Additionally, strong appetites from all the major capital sources led to another pick-up in the amount of commercial and multifamily mortgage debt outstanding. In line with the strength of apartment fundamentals and values, there was a solid increase in the amount of multifamily mortgage debt outstanding, but in a sign of renewed interest in other property types, the increase in mortgage debt on other, non-multifamily commercial properties was the largest since 2007.
The full report can be read here.