US Commercial & Multifamily Originations Rose in Q3

The Mortgage Bankers Association reported that Q3 saw $47.7B in new commercial and multifamily mortgage debt, bringing the total to $4.75T, driven primarily by multifamily.

Life insurance companies were the largest contributors to the increase, continuing to show strong demand for commercial and multifamily properties.

Multifamily Moves

Multifamily debt remained the strongest performer in the real estate credit space, growing by $29.8B (or 1.4%) in Q3. This continues the trend of multifamily debt outpacing other property types from earlier in the year:

• Life insurance companies played a key role in this debt growth, adding $10B to their multifamily holdings (up 4.3%).
• Agency and government-sponsored enterprise portfolios also showed solid growth, boosting their multifamily holdings by $12.3B (or 1.2%). 
• Although banks contributed less overall, they still added $4.7B (or 0.8%) to their multifamily portfolios.

Good Ole Life Insurance

Life insurance companies were the largest contributors to the overall growth in commercial and multifamily mortgage debt, increasing their holdings by $21.2B (or 2.9%). These institutions—which have a long-standing appetite for stable, long-term real estate investments—continued to show confidence in the multifamily market.

Alongside life insurance companies, GSEs and agency portfolios also continued their positive trajectory, with $12.3B (or 1.2%) more commercial and multifamily holdings. GSEs remain important players in the debt market, providing significant liquidity to the sector.

CMBS, CDOs, ABS

Commercial mortgage-backed securities (CMBS), collateralized debt obligations (CDOs), and asset-backed securities (ABS) saw a combined increase of $9.6B (or 1.6%) in Q3. 

These securities, which pool together mortgages for sale to investors, remain an attractive option for those seeking higher returns, contributing to the ongoing strength of the CRE debt market.

Pension Plan Pivots

While many sectors saw growth, one notable trend was the reduction in exposure by pension plans, which reduced their holdings in commercial and multifamily debt by 8.8%.

The pension funds’ decision to pull back suggests they’re rethinking their long-term investment strategies amid evolving market conditions. It signals a changing risk appetite among institutional investors, possibly due to still-high interest rates and uncertainty.

Zooming Out

The continued demand for multifamily debt indicates the commercial mortgage market remains resilient. The Q3 results highlight the ongoing confidence from major investors, such as life insurance companies and government agencies, in the multifamily sector.

Looking ahead, the market could experience further growth as inflation stabilizes and borrowing costs decrease. With interest rates potentially easing, originations may see a boost, providing additional momentum to the commercial and multifamily mortgage markets in 2025.