CMBS Issuance in Q1 at Lowest Level Since 2012

Article originally posted on Globe St. on April 25, 2023

CMBS issuance dropped to levels not seen since 2012 in the first quarter, totaling a “mere” $5.98 billion that was 12% less than fourth-quarter volume and 79% less than the same period a year ago, according to a new report from Trepp and Commercial Real Estate Direct.

Rising interest rates and increasing bond spreads were the culprits as only four conduit deals were priced during the first quarter, and two were backed solely by loans with five-year terms.

Trepp said that issuers were “stymied every step of the way” when they wrote loans and when they tried selling them through the CMBS market.

Uncertainty about interest rates had prompted property owners to demand five-year mortgages, instead of 10-year loans, doing so in the hope of gaining flexibility in the event interest rates declined.

Looking at property sales, volumes in February had dropped by 51 percent from a year ago. And prices had declined by nearly 7 percent from last year, a testament to the widening gap between buyer and seller expectations – another detrimental factor.

Facing higher borrowing costs, buyers had to decrease the prices they would pay.

Goldman Sachs, meanwhile, was the most active book-runner in the CMBS market during the first quarter, with a nearly 22 percent share of the anemic market. Wells Fargo Securities was next with a 20.2 percent share of the market and BMO Capital Markets was third.