Making Deals Pencil
By Maddie Winship, Senior Research Analyst, Yardi Matrix
Economic uncertainties—driven by trade tensions and weakening global markets—have led the Federal Reserve to cut rates three times in 2019, with the benchmark rate now falling between 1.5 and 1.75 percent. As interest rates have declined, borrowing costs for commercial real estate investors and developers have softened. Despite a large amount of capital ready to be deployed, however, it is becoming more of a challenge to find investment transactions that pencil in this saturated environment.
This year’s participating firms originated upwards of $148 billion as direct lenders and more than $131 billion as financial intermediaries over the 12 months ending in September 2019—a 12.2 percent increase over the previous year. CBRE and Cushman & Wakefield jumped to the top of the list, up from a respective third and eighth places in 2019. Half of the top companies are licensed GSE affiliates, and most originated loans across all asset classes, with the highest percent of lending activity occurring in the multifamily and office sectors.
Moving into 2020, multifamily and office will fare well, particularly in secondary or tech hub markets where demographic shifts are fueling strong demand for these two sectors. Even in tech hubs markets with strong fundamentals, though, finding deals this late in the cycle continues to be difficult. Investors will likely have to settle for lower yields than they had become accustomed to earlier in the economic cycle.
The 2020 CPE-MHN Top Mortgage Banking Firms ranking utilized self-reported data for all firms. The ranking is a weighted formula based on a variety of factors, including total origination volume, coverage offered, growth in transaction volume and loan positioning, among others. The ranking represents what we feel is a logical balance between firm growth and market share, as well as sector diversity or specialization. Ranking factors are not limited to the data on this page.