New Commercial Mortgages Up 36% in 2010 Show Market Healing


In 2009, the doomsday crowd was preaching that the commercial real estate market would crumble much like housing and trigger a double dip recession. That fear is looking more and more distant. Today, the Mortgage Bankers Association provides some additional evidence that there's no commercial real estate storm on the horizon after all.

The MBA reports that commercial mortgage originations last year soared past 2009 levels, up 36% to $110 billion. And they're increasing consistently: banks created 88% more new commercial mortgages in the final quarter of 2010 compared to the same quarter in 2009. Here's the chart from the MBA on its commercial mortgage index:

MBA CM Index 2010-q4.png

As you can see, at 114 in the fourth quarter, the index isn't far off from what was seen in 2001 through early 2003. That wasn't exactly a time of amazing economic progress, but it also wasn't a time when the real estate bubble was rapidly inflating. The index isn't likely to rebound to the levels seen during 2006 and 2007 for that reason. But if it continues to rise as it did throughout 2010, then it won't be long before the market is functioning as it did in normal times.

This taken, together with news that the commercial mortgage-backed securities market -- which may see issuance hit $37 billion this year -- is beginning to recover, shows that commercial real estate should avoid a collapse. Many businesses are no longer feeling severe effects from the recession, as profits and revenues have rebounded broadly. At this point, the U.S. economy's problem is creating jobs. This could affect some multifamily properties as unemployed Americans struggle with their bills. But other commercial real estate should avoid massive losses.

This is another encouraging sign as the U.S. recovery slowly trudges on. Although it won't necessarily have an extremely positive effect on hiring, it does imply that commercial real estate is one fewer sector to worry about.

Quick Update: The MBA just put out another release, declaring that just 11% of total non-bank commercial/multifamily mortgage debt will mature in 2011, and only 9% in 2012. Again, this implies a distant possibility of widespread defaults due to firms not managing to secure refinancing as their loans mature.

Jump to comments
Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
Get Today's Top Stories in Your Inbox (preview)

Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.

Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus


Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.


What Makes a Story Great?

The storytellers behind House of CardsandThis American Life reflect on the creative process.


Tracing Sriracha's Origin to Thailand

Ever wonder how the wildly popular hot sauce got its name? It all started in Si Racha.


Where Confiscated Wildlife Ends Up

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.


Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.


The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air



More in Business

Just In