Newmark™, the largest independent commercial mortgage banking firm in the western U.S., completed $2.5 billion of commercial mortgages during 2017 across 318 unique transactions, including $600 million of commercial mortgages during 4Q2017. This marks the company’s sixth consecutive year exceeding $2 billion in total annual loan production.
The active property types financed by Newmark during 2017, in order from highest descending, included multifamily, office, industrial and retail assets; with the company’s Phoenix, San Francisco and Los Angeles production offices showing the highest transaction volumes during the 2017.
Newmark’s Phoenix production team contributed $521 million to the company’s 2017 production totals, with $500 million of the commercial mortgage transactions secured for assets within Arizona.
“Arizona and especially Metro Phoenix commercial real estate continues to attract significant interest from life insurer and pension fund lenders because of the region’s healthy economy and strong demographics,” said Tim Storey, principal with Newmark’s Phoenix production team. “Our ability to underwrite against the strengths of the local market and strategically identify the right lenders for specific asset types and investment models kept our office busy in 2017. From portfolios of industrial property to office buildings, mobile home parks, multifamily and retail assets, our team structured a variety of commercial mortgage solutions for a wide array of institutional and private owners.”
Storey pointed to unique transactions of interest that showcased demand and opportunity in 2017:
• Industrial – Placed $151 million of long-term financing for a 30 property portfolio owned and operated by a local investor in various Arizona markets.
• Mobile Home Park(s) – Placed more than $100 Million of long-term debt across 10 individual properties for this unique property class.
• Retail – Secured $30 million for the acquisition of Mesa Grand Center in Mesa, AZ.
“2017 was an active year for commercial mortgage lending, with many lenders increasing their allocations throughout the year as the market continued to offer competitive returns in comparison,” said Michael Heagerty, principal and CFO with Newmark. “We anticipate production to remain consistent heading into 2018, and will be adding personnel and growing our team in 1Q2018 in response. Notably, the ability for quality retail projects to identify capital sources in the face of tumultuous market trends provided a unique bright spot in 2017, a trend we will watch as we head into 2018.”
Heagerty pointed to the following trends as worthy of consideration at the close of 2017:
- 2018 – Without dramatic and currently unforeseen changes to existing economic trends, Newmark’s 2018 production volumes should be consistent with previous years in terms of lender allocations, capital availability and overall production totals.
- 2018 Interest Rates – Interest rates are expected to climb in 2018, but spreads compression could compensate to keep commercial mortgage finance rates at historic lows.
- 2017 Volume – Commercial mortgage finance demand performed as expected in 2017, with overall rates remaining at historic lows. Production was consistent for Newmark throughout 2017, with the company exceeding $2 billion in total production for a sixth straight year.
- Regions – More than 75 percent of financed assets in 2017 were located in Southern California, Northern California, Arizona, and Northwest submarkets. These markets remain popular with lenders due to their strong fundamentals and long-term performance potential.
- Retail – While the retail sector faces dramatic and tumultuous operational shifts in the modern economy, the ability to finance the highest quality retail properties at the best available rates offered owners in this property category welcomed relief in 2017, a trend to watch in 2018.
- Capital Sources – Newmark placed a significant majority of commercial mortgages with life insurer and pension lenders in 2017, and expects allocations to be consistent in 2018. Bank sources followed in a distant second, along with CMBS, bridge lenders and alternative sources. CMBS took a step back in 2017, but with additional lenders allowing Newmark to be a primary servicer, Newmark looks to an improvement in 2018.