Commercial real estate lending plunged 53% last quarter as sector hits a 'logjam'

• Commercial real estate lending is in a "logjam," according to the Mortgage Bankers Association.
• Commercial lending plummeted 53% in the second quarter compared to last year.

Commercial real estate lending more than halved last quarter, attesting to the growing financial pressures that are weighing on the market.

Commercial and multifamily real estate mortgage loan originations were down 53% in the second quarter compared to a year ago, according to the Mortgage Bankers Association, though they were up 23% from the first quarter.

"High interest rates, uncertainty about property values, and questions about some property fundamentals are all contributing to the slowdown," MBA head of commercial real estate research Jamie Woodwell said in a statement on Tuesday. "We expect the logjam to begin to break in the coming quarters, but the path forward will depend on where interest rates and other aspects of the economy go from here."

Among the various types of properties, healthcare saw a 74% yearly decline in dollar volume of loans, retail and industrial both fell 55%, multifamily dropped 48%, and hotels slipped 32%, MBA said.

Experts have been warning of trouble for the commercial real estate sector over the past year, thanks to persisting work-from-home trends that are weighing on demand.

Office vacancies just hit a record-high of 13.1% in the US, according to data from the National Association of realtors, despite more people returning to in-person work.

Meanwhile, there's around $1.5 trillion of commercial real estate debt that is soon set to hit maturity and needs to be refinanced, which could bring on a wave of distressed properties and cause commercial real estate prices to plunge as much as 40%, per a Capital Economics estimate.

Big US banks are also trying to dump risky commercial real estate loans, with lenders like JPMorgan, Goldman Sachs, and Capital One in search of buyers, Bloomberg reported.