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Market Discipline Bodes Well for CMBS
Commercial Mortgage-Backed Securities lending made a strong comeback in 2017, rising to the second-highest level of originations since 2007. According to research by JLL, CMBS originations grew to $95.4 billion in 2017, a 25.6% increase over 2016.
For 2018, the CMBS issuance outlook is more tempered: between $60 and $80 billion in the U.S., according to industry experts. But that dip could be a good thing. JLL’s Tom Fish says, “The size of the CMBS market is where it should be at this point in the cycle, and it’s continuing to provide a valuable alternative for property types that might not be getting life company or other institutional money because of lender selectivity.”
Property types such as unanchored retail centers and hotels have benefitted from the CMBS market’s strength. Issuance of floating CMBS loans in the hotel sector grew from $2.7 billion in 2016 to nearly $14.5 billion in 2017, according to JLL. The measured CMBS market is also benefitting b-piece buyers.
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