Berkadia’s 2019 Outlook Powerhouse Poll also reveals continued strength in GSE lending, technology as a growing focal point
NEW YORK – January 22, 2019 – Mortgage banking and investment sales experts at Berkadia are preparing for interest rate hikes and adopting new technologies this year, according to the firm’s 2019 Outlook Powerhouse Poll. The proprietary poll, conducted in December 2018, collected insights from over 150 Berkadia investment sales brokers and mortgage bankers across 60 offices to assess 2018 commercial real estate activity and opportunities for the year ahead.
Despite four interest rate increases throughout 2018, investment sales brokers and mortgage bankers alike agree that the commercial real estate industry ended the year on a high note—82 percent said that deal volume either met or exceeded their expectations for the year. However, Berkadia’s professionals are keeping a close eye on interest rates in 2019. Eighty-one percent of mortgage bankers and 83 percent of investment sales brokers have it on their radar for the year ahead.
Overall, the industry should remain active, but rising interest rates could be a headwind. Eighty-nine percent of respondents expect the number of multifamily transactions in 2019 to remain the same or decrease from the year prior; however, 77 percent say that multifamily deal size will either grow or at least remain the same as 2018. And capital should be available for those deals: 77 percent of respondents anticipate available capital to increase or remain the same compared to last year.
“This year, we may see the commercial real estate industry hit the reset button after a dynamic past 12 months. The market absorbed the heavy interest rate increases of 2018, but interest rate uncertainty in the year ahead could impact the current level of investor interest,” said Ernie Katai, Executive Vice President and Head of Production at Berkadia. “That being said, available capital remains strong and we may see more larger-scale transactions than in years past.”
GSE Confidence Remains
Although 2019 begins with many question marks regarding the activity of Government-Sponsored Enterprises (GSEs), Berkadia’s mortgage bankers are confident that they will remain the lenders of choice, with 82 percent of respondents expecting GSEs to provide most of the financing this year. The ongoing discussions around GSE Reform are not off the table, however—67 percent of Berkadia professionals agree that the potential regulation will have a big impact on the way they do business this year.
“While we await new Federal Housing Finance Agency (FHFA) and Freddie Mac leaders at the start of the year, there may be more smoke than actual fire around the issue of GSE Reform, as the administration focuses on other priority issues,” said Katai. “Until we have further clarity on what reform will look like, we expect investors to keep their foot on the gas when it comes to deal activity.”
CRE Technology Plays Catch Up
Technological advancements have increased across the industry over the past year, but there’s still potential when it comes to fully integrating this technology into everyday workflows. Eighty-five percent of mortgage bankers and 78 percent of investment sales brokers agree that their respective commercial real estate functions have significantly increased technology use to better streamline processes in the past year.
When asked what types of technology will impact commercial real estate the most, big data (55 percent), artificial intelligence (12 percent) and blockchain (10 percent) ranked at the top.
“The integration of new commercial real estate technologies has increased efficiency and transparency in the market, speeding up everything from underwriting to marketing. Information and data are more readily available than ever before, creating a level playing field across the industry and making personalization of relationships that much more valued,” said Katai. “Technology’s introduction into the market is just beginning. This year, we may see further adoption of technology solutions, such as artificial intelligence, that could more significantly disrupt the industry than in years past.”
In 2018, Berkadia’s loan origination volume was over $26 billion, while investment sales totaled more than $8 billion. Berkadia was also a top lender in 2018, arranging over $18 billion of combined agency loan volume.
About the Powerhouse Poll:
The 2019 Outlook Powerhouse Poll data was collected in an online survey conducted internally by Berkadia through SurveyMonkey in December 2018. The sample was based among Berkadia’s 60 offices throughout the U.S., consisting of 54 investment sales brokers and 97 mortgage bankers, totaling 151 overall respondents.