CMBS Performance At The Half-Year Mark

CHICAGO–The commercial mortgage-backed securities market is tracking better year to date compared to the same period the previous year, according to stats and an analysis by Morningstar in its Q3 Market Outlook.

CMBS issuance started strong this year and Morningstar expects this momentum to continue until at least the third quarter of 2018. Citing figures by Trepp, it reports that by the end of June, new issuance totaled $44.3 billion, compared to the $34.45 billion issued in the same period last year.

Driving the activity has been issuance volume for single-asset, single-borrower CMBS deals, which has been fueled by deals on trophy skyscrapers in major cities. According to Trepp, SASB issuance will total $18.06 billion by the end of the second quarter versus $11.88 billion from the same period a year ago. So far office loans have made up the largest portion of total issuance with $4.48 billion or 29.1% of this year’s volume.

The market should remain stable for the remainder of the year, Morningstar says. It writes:

While there may be some pockets of risk, continued economic growth should buoy demand across most sectors. The industrial sector may be the prime beneficiary and the multifamily, hospitality and office sectors may slow after several years of gains and more new construction. Retail could be at higher risk, as the industry consolidates and attempts to cope with the increased competition from online retailers.