The trade group said Thursday, May 7, that originations for hotel, industrial, and retail properties all decreased in the first quarter of 2020 compared to the same three months of 2019. Hotel originations were down 42%, followed by industrial (39%) and retail (37%).
Meanwhile, office property originations were up 8% from the first quarter of 2019 and healthcare properties were up 16%, according to the MBA's Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.
A good start gone bad
The declines came suddenly after borrowing and lending got off to a fast start for the new year, said Jamie Woodwell, the MBA's vice president of commercial real estate research.
"That strong start has been derailed by the coronavirus and our individual and collective responses to it," Woodwell said Thursday in the trade group's press release.
Woodwell said low interest rates do seem to be attracting some property refinancing but that economic uncertainty has tamped down overall transaction activity.
"Property investors and lenders have now turned more of their attention to their existing portfolios instead of new business opportunities," the MBA vice president said.
Just one example from the hospitality vertical
Just hanging on to the business they have is a priority for many. The American Hotel & Lodging Association (AHLA) said this week that 83% of hotel debt borrowers have asked for debt forbearance or some other form of payment deferral from their lenders.
And, according to a membership survey they conducted April 28 to 30, more than 95% of the more than 900 respondents have applied for Paycheck Protection Program (PPP) loans and/or Economic Injury Disaster Loans (EIDL), the emergency loans first approved by the CARES Act and added to soon after the initial funding was exhausted.
The AHLA said 79% of the applicants were approved for one or both and that the median loan applied for was $150,000. The PPP loan, specifically, is aimed at allowing employers to keep staff on the payroll.
Hanging on for a recovery
But, the survey found, more than 50% of those AHLA members said that wasn't enough to rehire their staff. That's because the loans only cover eight weeks of payroll, and recovery is expected to take much longer, especially since many hotels are still closed by government order.
That critical conundrum, of course, is the bane for millions of businesspeople across the country right now. Most laid-off workers expect to be rehired in the coming months, a sign of optimism that the collective response that derailed the economy could help set it aright when the coronavirus coast is clear enough.
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