According to an economic forecast released by the Mortgage Bankers Association (MBA), total commercial and multifamily borrowing and lending is expected to fall to $700 billion in 2023, which is a 5 percent decline from the $740 billion total expected in 2022.
Multifamily lending is expected to drop to $393 billion in 2023 – an 11 percent decline from last year’s expected total of $439 billion. MBA anticipates borrowing and lending will rebound in 2024 to $887 billion in total commercial real estate lending and $483 billion in multifamily lending.
The biggest influence in this negative forecast for 2023 is the Federal Reserve’s Federal Open Market Committee (FOMC) which has rapidly raised federal fund rates through 2022 and has made it clear that rates will continue to increase through at least the first half of 2023.
“The typical FOMC member’s expectations for the federal funds rate at the end of 2023 increased throughout 2022, jumping from 1.6 percent to 5.1 percent as of December 2022,” Jamie Woodwell, MBA’s head of commercial real estate research, said in a release. “Those shifts in outlook from the Federal Reserve are both a response to changing economic conditions and a cause of change themselves.
“Commercial real estate markets are not immune to these shifts, and we expect borrowing and lending backed by commercial and multifamily properties to decline again this year,” Woodwell added. “Uncertainty and volatility around the paths of the economy, interest rates, and property valuations will likely continue to cause instability for commercial real estate markets well into this year.”