Article by Fuquan Bilal, NNG Capital Fund

Commercial mortgage lending could clock in another record year for 2019, and see billions more deployed in 2020. The smart money is bullish on commercial real estate lending and debt. Big players plan to increase their stake in this sector in the months ahead.

That could be a great thing for real estate investors of all sizes, and provide new opportunities for those navigating the space between distressed assets and new capital eagerly waiting to be put to work.

Who is Funding CRE Deals Now

According to the Urban Land Institute:

  • Banks still fund 40% of all CRE debt each year
  • Government sponsored agencies take up 22% of the market
  • Commercial mortgage backed securities make up 16% of the market
  • Debt funds and nonbank lenders account for 11% of lending
  • Life insurance companies make up 10%

CRE Lending Rising

As of the middle of 2019 all commercial mortgage debt totalled $3.5T. Commercial and multifamily mortgage lending grew 10% year over year through the second quarter of 2019, and 29% between Q1 and Q2 according to the Mortgage Bankers Association. There was a 32% rise for multifamily loans specifically. 42% of the loans made in the first half of the year were refinances.

With the stock market still frothy, the political chaos only heating up, and the residential mortgage lending market hampered by over-regulation, even more capital is likely to find its way into commercial mortgages over the next 12 months.

Life insurance companies in particular are preparing to ramp up their activity. Total multifamily loan originations are expected to hit yet another record high in 2020 according to coverage by Housing Wire. Life insurance companies have said they hope to add $50B to $120B in multifamily loans to their portfolios. Even a $10B increase would mean a 30% rise in the total for multifamily lending compared to 2018.

Opportunities For Real Estate & Debt Investors

All of this capital means liquidity for investors. Especially in the form of cheap money. At the same time there are some sizable gaps in the market.

Keep an eye on maturities. The last few years of sprinting and new investors trying to graduate to multi families, without much thought for short deadlines and the need to refinance and restructure debt could present some opportunities.

There are also many borrowers struggling on prime properties that could be ripe for conversions.

The smart money is definitely in, but it needs active investors to put it to work for them.


Discover additional information and learn about investing in secured debt and real estate, please visit NNG Capital Fund