Los Angeles – September 30, 2016 – The MBA released its second quarter 2016 data which highlighted a 1.4% increase in commercial/multifamily mortgage debt over the first quarter of 2016. Multifamily mortgage debt grew more rapidly with a 2.6% increase during the same time period. A rise in originations for office and industrial properties led the overall increase in commercial/multifamily lending volumes when compared to the second quarter of 2015. There was a 15% year-over-year increase for life insurance company originations, a 3% decrease in GSE (Fannie Mae and Freddie Mac) originations, and a 40% decrease in the dollar volume of Commercial Mortgage Backed Securities (CMBS) originations.
Some pundits have turned their focus to trends and themes for the commercial real estate sector going into 2017. Common themes include global economies, a flight away from core assets, and continued demographic shifts. For further prognostication on the real estate sector, please see the presentation titled “Playing Ball in the Later Innings” linked inside from Dr. Mark G. Dotzour, economist at Texas A&M.
In CMBS, 6 conduit deals ($5.9b) and 4 SASB deals ($2.2b) priced in September. YTD conduit issuance stands at $31.6b which is still 32% lower than YoY 2015. New issue 10y AAA LCF bonds priced in a range of S+106bp to S+117bp and BBB- bonds priced in a range of S+520bp to S+630bp. September was a tough month for CMBS cash in secondary, as spreads widened across the stack with credit underperforming. The 6 deals that came in September were pretty generic and with spreads already leaking wider throughout most of August, the additional supply put pressure on the market. Tiering continues dominate the A- and BBB- rated tranches, with retail exposure in earlier vintages weighing heavily on those deals. Overall, we ended the month pretty uneventfully, with buyers and sellers of credit pretty far apart in terms of where they were looking to transact.
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