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Mar 23, 2022

Pandemic Recovery is Underway, but Rising Rates a Concern

by Richard Rennell

We are now two years past the start of the pandemic in the U.S. Some real estate sectors have fared better than others, however research points to recovery across the asset classes and a greater willingness among finance providers, albeit to varying degrees, to lend. Yet a rise in interest rates was cemented when January’s 7.5% year-over-year inflation number marked the biggest gain since 1982. Thus, while lenders may be more comfortable financing more property types, borrowers will need to adjust to a new rate reality.

The recovery data is compelling. In February, the Mortgage Bankers Association (MBA) released a report on commercial and multifamily mortgage originations for the fourth quarter of 2021. The report pointed to the quarter as a record end to a record year of lending. MBA’s numbers demonstrated a 79% increase in originations year-over-year and a 44% increase over the previous quarter.[i] Notably, low interest rates were one reason cited for the jump.

The sector hit hardest by the pandemic, hospitality, is rebounding and finance availability is as well. MBA’s figures indicated a 167% year-over-year increase in the dollar volume of loans for hotel properties. Even so, borrowers should expect cautiousness among lenders as this sector continues to recover.

The MBA noted a 122% year-over-year increase in the dollar volume of office loans. COVID’s Omicron surge moderately slowed demand for new space inquiries in December, however sublease space availability fell.[ii] Office lenders today are looking at locations, tenant stability, credit of the tenants, as well as lease rolls during the loan terms.

The retail sector delivered a 109% year-over-year increase in the dollar volume of loans, per the MBA. Likewise, Trepp’s Year-End 2021 report found annual retail property loan delinquency rates declined, however, noted a significant drop specifically in CMBS loan activity, demonstrating that lenders remain cool and cautious on this sector.[iii]

The MBA found the year-over-year increase in industrial loans by dollar volume was 113%. In 2021, investors couldn’t get enough industrial space and the sector held onto its place as the top performing asset class. Lenders view industrial today favorably. Retailers and suppliers are stockpiling inventory and the move away from brick-and-mortar spaces continues as online shopping reigns supreme. 

Multifamily hit a 53% year-over-year increase in dollar volume of loans. Apartments continue to prove they are essential and the sector is still favored by lenders. Under the current administration, agencies Freddie Mac and Fannie Mae have strengthened their commitment to ensuring finance is available for affordable and workforce housing properties.

Borrowers must understand that, despite commercial real estate’s ongoing recovery from pandemic-related distress, inflation and rising rates are today’s realities. Buyers should consider moving more quickly on any present deals as lenders are being forced to increase their pricing. In specific cases discounts are emerging, for example with the agencies’ for some affordable and workforce housing transactions. Ultimately, borrowers and lenders both need to adapt to a changing interest rate environment, but expect commercial real estate transactions to continue.

About the Author

Richard Rennell is managing director of CRE Term Lending with Sabal Capital Partners, LLC, a wholly-owned subsidiary of Regions Bank and a nationwide commercial real estate lender. Visit

[i] Mortgage Bankers Association (MBA), Commercial/Multifamily Borrowing Jumped 70 Percent to New Record in  the Fourth Quarter of 2021, February 14, 2022,

[ii] CBRE, Omicron Surge Slows U.S. Office Demand in December, January 26, 2022,

[iii] Trepp & CRE Direct, The Year-End 2021,