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According to a new report from CBRE and data from The Warren Group, the commercial real estate market continues to show signs of improvement.
The CBRE Lending Momentum Index, which tracks the pace of CBRE-originated commercial loan closings in the U.S., rose by 13 percent in the third quarter versus the second quarter 2024. It’s the second period of quarter-over-quarter growth after five quarters of declines.
The total volume of originations has nearly hit the five-year pre-pandemic average, CBRE said. But the index was still 3.5 percent down compared with the third quarter of 2023.
“With accretive leverage achievable throughout the third quarter, we saw a notable uptick in acquisition financing compared to both the prior quarter and the same period of last year,” James Millon, U.S. president of debt and structured finance for CBRE, said in a statement. “The CMBS single-asset, single-borrower markets continued their strong issuance pace, with all asset classes represented. Notably, large office transactions in New York City underscored the return of debt liquidity for high-quality office assets backed by major institutional sponsors at conservative leverage.”
In addition, expectations of more Federal Reserve rate cuts drove some lenders to sell loans off their balance sheets, he said.
In the third quarter, life insurance companies were the leading contributors to CBRE’s non-agency loan closings at 43 percent of total volume. Banks only made up 18 percent of non-agency loans, down from 38 percent a year earlier thanks to concerns over potential distress, CBRE said.
Data from The Warren Group, publisher of The Commercial Record, shows a slightly different situation in Connecticut. Banks made up the majority of CRE in second-quarter loans measured by The Warren Group (54.91 percent of loan volume). However, this is down from 62.96 percent in second quarter of 2023.
Finance companies, life insurers and other non-bank lenders increased their market share year-over-year. They loaned 36.38 percent of dollars in the third quarter of 2023 but 44.63 percent in the third quarter of 2024.
Overall commercial mortgage volume jumped 67 percent in Connecticut year-over-year in the third quarter, to $3.33 billion.
