The commercial mortgage backed securities (CMBS) market is expected to end 2014 on solid footing, with loan delinquency rates falling and new issuance likely to surpass last year’s level, according to market observers.
The CMBS delinquency rate fell to 5.8 percent in November, its lowest level in five years, Trepp, LLC reported. As of Dec. 1, delinquencies have fallen 163 basis points, down from 7.4 percent in December 2013, according to Trepp.
“The CMBS market is heading into year-end with a lot of momentum,” said Manus Clancy, Trepp senior managing director. Increased volume, falling delinquency levels, a drop in the Treasury 10-year note yield and lower energy costs have produced a scenario in which “the wind is fully at the market’s back,” he said.
Trepp research associate Joe McBride said new CMBS issuance in 2014 should be just shy of $100 billion, in line with initial estimates for the year. CMBS issuance totaled approximately $86 billion in 2013. McBride noted that a number of factors have weighed on the CMBS market this year, including the interest rate concerns, lending standards, and the upcoming maturation of CMBS loans issued between 2005 and 2007.
While those concerns will likely persist, McBride said, early estimates point to 2015 CMBS issuance volume matching 2014 levels.
CMBS Lenders in Competitive Position for 2015
“CMBS lenders are certainly in a good competitive position for 2015,” said Sam Chandan, chief economist of Chandan Economics and a professor of real estate development at the University of Pennsylvania’s Wharton School. “I think that will allow them to capture a larger share of the market than they did in 2014.”
Ben Thypin, director of market analysis at Real Capital Analytics, said that while new CMBS issuance of about $100 billion in 2014 is still a far cry from the $230 billion raised in 2007 prior to the financial crisis, he noted that “we’re heading in the right direction.”
As for the large number of maturing CMBS loans that come due in 2015, 2016 and 2017, “the capital is certainly out there to refinance these loans,” Thypin said.
“We’re already starting to see new CMBS loans refinance old CMBS loans, often through the same relationship. So, so far, so good,” he added.
Read More: https://www.reit.com/news/articles/cmbs-market-boosted-positive-fundamentals-2014-comes-close
Ben Carlos Thypin
I am currently the co-founder of Quantierra, the world's first data driven real estate brokerage and investment manager. In my former life as Director of Market Analysis at Real Capital Analytics, I worked with press outlets large and small to provide them with great data and insightful commentary. Here are some of the results of this collaboration. For the rest, please check out the News Archive.