Kroll Bond Rating Agency (KBRA) is predicting a 23.6% year-over-year increase in commercial real estate loan originations for 2024, according to a new report. That’s roughly in line with the Mortgage Bankers Association’s projection of a 25% Y-O-Y increase next year.
However, KBRA also cited two conflicting views for 2024: the consensus among investors interviewed by the Urban Land Institute and PwC that an uptick in transaction volume is expected, and CBRE’s forecast of a 5% decline in investment volume next year. “With these divergent announcements coming within days of each other, it is no wonder that clouds continue to hang over CRE views and projected activity in 2024,” according to KBRA’s report.
The rating agency said its projection of a 23.6% increase in volume assumes “a somewhat steady interest rate environment, along with our expectation for a generally rocky capital and CRE market in the near term that will begin to exhibit signs of stabilization as 2024 progresses. This will be the result of an increasing number of borrowers accepting the new rate environment and lower valuations, and no new significant CRE or macroeconomic surprises.”
In addition, KBRA reported, “given performance pressure on existing loans, we could see increased loan pool sales and, as we discussed in a July report, reemerged securitizations of distressed debt, which could add to issuance volume not reflected in our 2024 forecast.”