CMBS Market on the Upswing after Slow 2015 Start

CMBS Market on the Upswing after Slow 2015 Start

The U.S. CMBS market is gaining momentum in February, after a slow start in the first month of the year.

January proved a disappointing month for the CMBS sector, with $3.5 billion in new issuance, according to Commercial Mortgage Alert, an industry publication. The figure was little more than half of the $6.4 billion in CMBS volume completed in January 2014 and almost 59 percent below the $8.5 billion completed in January 2013.

The market is becoming more active, however, with five deals totaling $9.8 billion in the works, according to a Jan. 6 report from J.P. Morgan. Year-to-date, the total volume of confirmed CMBS issuance has reached $8.4 billion, ahead of $7.9 billion reported for the same period in 2014.

“Issuance volume has started to pull ahead of 2014,” wrote analysts Edward J. Reardon and Meghan C. Kelleher. “The CMBS credit curve has steepened slightly since the start of the year, but we still view the sector as relatively attractive versus other credit alternatives.”

Researchers with Trepp LLC, a provider of information and analytics for the CMBS, commercial real estate and banking sectors, hold a similar outlook.

“Conditions remain favorable for elevated issuance activity,” they wrote in a January note. “Plenty of 2015 loans will need to be refinanced, the 10-year treasury yield keeps decreasing and spread volatility has been modest. All of this means investors and issuers should stay busy for the foreseeable future.”

In another positive development, the 30+ day delinquency rate for CMBS loans fell to 5.66 percent in January, from 5.74 percent in December, according to Trepp. The delinquency rate was also 159 basis points lower than the 7.25 percent recorded in January 2014.

The CMBS delinquency rate fell for all major property types, except office buildings. The lodging sector posted the greatest one-month decline at 4.4 percent, 37 basis points lower than the rate reported in December. The delinquency rate in the industrial sector also fell considerably, by 35 basis points to 7.2 percent. The retail sector posted a six basis point decline, at 5.6 percent, and the multifamily sector a four basis point decline, at 8.81 percent, reports Trepp.

In the office sector, the CMBS delinquency rate went up 10 basis points in January, to 6.18 percent.  

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