Commercial mortgage backed securities along with all types of the investment vehicle were at the centre of the snowball that crushed the American and then the global economy and property market. So it is heartening to find out that along with so many other signals of a US real estate recovery, that CMBS sales are back on the up and up.
According a report issued by Deutsche Bank, the non-agency issuance volume of CMBS will increase by 50% to approximately $60 billion this year, making it the biggest year since the financial crisis erupted. In the report, Deutsche Bank highlighted several factors as contributing to the growth in CMBS including increasing demand and bank's willingness to lend, but said the most important factor was the improved version of the CMBS conduit CMBS 3.0.
"In our view, it is nearly impossible to over-estimate just how important CMBS 3.0 is to the health of the commercial real estate market," the report said/
"The current level of demand is even higher than in the months before the market cratered," according to the report.
The bank went onto explain how tightening spreads were making CMBS loans more attractive to borrowers, accounting for the increased demand. The report also predicts increasing liquidity in the market going into next year, forecasting that of the $40 billion worth of loans maturing next year $34 billion will be refinanced, $5 billion will be extended and only $1 billion will be liquidated. This is a stark contrast to this year said the report, when only $1 billion was refinanced, $4 billion liquidated and $500 million extended.
Deutsche Bank is incredibly bullish on CMBS going forward, predicting not only that the 4th quarter of this year will become the 5th straight quarter of increased issuance, but that the first quarter of next year will become the 6th.
- Thursday 29 November 2012