Gantry, the largest independent commercial mortgage banking firm in the U.S., is experiencing a year-over-year decrease in commercial mortgage production through H1 2023. Volatile commercial real estate markets have remained consistent since H1 2022 as market participants continue to grapple with price discovery, higher rates, maturing loans, distress, disrupted fundamentals, and banking fallout.
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“Typically, we would report overall production volume at this time of year but, as we are in the anomaly of a major cycle shift, let it suffice to say that new commercial mortgage production is at a low point as the market resets on a number of fronts”
This prolonged adjustment to a new rate climate has essentially reset the entire landscape for commercial real estate investment moving forward. Gantry is counseling clients to remain disciplined as options exist but to expect that rates, especially when compared to the historically low rates that defined the past ten years, will most likely remain higher for the foreseeable future. This is already showing to have an outsized impact on maturities and during the next 2-3 years, it may ultimately require new capital infusions or other rescue capital to successfully navigate.
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“Typically, we would report overall production volume at this time of year but, as we are in the anomaly of a major cycle shift, let it suffice to say that new commercial mortgage production is at a low point as the market resets on a number of fronts,” said George Mitsanas, Principal with Gantry. “However, this does not indicate wholesale distress across the commercial real estate markets, as liquidity exists, and the economy remains strong with most asset classes and properties performing as underwritten. This is supported by the 100% performance of Gantry’s $18 billion loan servicing portfolio. Gantry is well prepared as a private company owned directly by its producers to weather the current cycle, and we will continue to serve clients and invest in our future via workforce retention and recruitment, including 2023 summer internships.”
During H1 2023, insurance companies and agencies were by far Gantry’s most active lenders for new loans as banks and credit unions continue to retreat from origination to focus on deposits and shoring up liabilities, CMBS spreads continue pricing higher than other forms of available capital, and debt funds throttle back on risk by limiting allocations, increasing pricing, and tightening underwriting. Gantry placed loans across all the major asset classes, including office, which remains the most challenged of the property types. Most loans were for industrial, retail, multifamily, and self storage properties with Gantry’s insurance correspondents or the agencies.
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