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Commercial Real Estate (CRE) loans are financing for property used solely for business purposes, such as office buildings, hotels, shopping centers, and the like.
While the basic principles of commercial lending work much like residential mortgages that loan money to individuals, CRE loans are typically made to business entities.
And commercial real estate lending experienced a banner year in 2018.
With the additional tax benefits from the Tax Cuts and Jobs Act of 2017 – as well as low interest rates and the widely held belief that the Fed would continue to raise interest rates in 2019 – loans for commercial real estate and multifamily spaces reached new highs in 2018.
Lenders in the commercial and multifamily space closed well over half a trillion dollars – a record $573.9 billion – in loans in 2018, with an average loan size of $19 million, according to the Mortgage Bankers Association (MBA).
That represents an 8% increase from 2017's reported volume.
The MBA also noted that 74% of lenders expect that lending activity this year will be the same, if not higher, than in 2018.
Commercial and multifamily space loans have also performed incredibly well in 2018, with delinquency rates near all-time lows – meaning very few borrowers are behind on their loan payments – which should only serve to increase lenders' desire to grow that portfolio going forward.
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