Europe Follows U.S. As CMBS Boom Opens Up Big Deals

The European commercial mortgage-backed securitisation market has roared back to life in 2025, and a record start to the year is helping some of real estate's biggest investors buy and refinance big deals that might not otherwise find debt capital.

While the CMBS market is still dominated by industrial transactions, loans in the data centre and holiday parks sectors — the latter seeing a massive £1.5B deal — have been securitised in the past 12 months. That shows that debt investors are willing to buy into large transactions backed by niche real estate asset classes, as long as they are throwing off plenty of cash. 

The surge in CMBS issuance in Europe mirrors that of the U.S. and highlights how investors across the world want to invest in real estate but are doing so via debt rather than equity. 

And with securitised loans often cheaper for borrowers than those in the traditional lending world, the influence of CMBS is set to grow, with the market opening up to smaller borrowers. 

“Typically, CMBS is a really volatile product in Europe," Morningstar DBRS Head of European CMBS Mirco Iacobucci said.

"Usually when there is some market volatility, it is the first one to disappear and the last one to come back. But I think there are a few elements this time that are quite encouraging for a functioning and stronger CMBS market,” he added.

The tone was set in the first quarter, when €3.3B (£2.9B) loans were issued and then securitised across six transactions, representing the highest quarterly tally since the global financial crisis.

With CMBS, a bank, usually an investment bank, issues a loan then sells bonds secured against the income from that loan. The bonds are divided into tranches, with different degrees of risk, which pay the bond investors different interest rates.

Those six Q1 transactions spanned three industrial and logistics deals, a mixed-use deal and two residential-style CMBS structures. By the halfway mark, CMBS issuance totalled €4.7B across 10 transactions. That is already more than 2024 and higher than 2022 and 2023 combined, despite a slight pause in April following U.S. tariff announcements and ongoing geopolitical uncertainty.

First half issuance in the U.S. was $60B, the highest first half total since the go-go peak of the last cycle in 2007. 

Lately, pricing for a number of the CMBS deals has been more attractive than traditional bilateral loans, Iacobucci said, with AAA-rated CMBS on offer at around 125 basis points lower than the start of this year.

That has not always been the case, given the greater complexity, and therefore fees, typically associated with structuring CMBS transactions.

“We’ve seen situations where CMBS pricing was, I would say, significantly lower than banking pricing, and while for the dynamics of the market in Europe, it works predominantly for large transactions, the next step might be to follow the U.S. and see smaller loans get into this pool,” Iacobucci said.

“It’s early days, the traditional bank lending market in Europe is still quite strong. However, banks in general have been retrenching from CRE exposure, and that may offer the right opportunity for CMBS to grow.” 

In terms of the borrowers utilising CMBS in Europe, big private equity firms dominate. Last year, the only deal that did not involve Blackstone was Vantage’s £600M data centre CMBS. And three of Blackstone's transactions involved logistics properties, underlining investor demand for the asset class.

Citi packaged loans from Blackstone’s UK logistics platform into a £840M CMBS in March, and in April, Blackstone securitised €798M of debt via UK Logistics 2025-1 DAC. That followed its first European CMBS of the year in February, the €525M Sequoia Logistics 2025-1 DAC, which was the largest euro-denominated CMBS since 2021.

In a real marker for the sector, in August a group of banks completed the UK’s largest CMBS sale since the Global Financial Crisis. It was a £1.5B deal involving Blackstone's Haven Holiday park sites, secured on a portfolio of 39 holiday parks and its head office.

“We think CMBS plays an important role in the European real estate debt market," Blackstone Head of Real Estate Europe Capital Markets Gadi Jay said.

"A well-functioning market needs a variety of liquidity sources. Part of the attraction of CMBS is the ability to take a single loan, split it into different tranches of credit risk and sell each tranche to different types of investors with specific risk-return objectives, unlike a traditional loan where all lenders essentially achieve the same risk-return."

Pointing to Haven’s refinancing, he said Blackstone created a total £2.8B debt package split via a £1.3B loan primarily funded by banks, and a £1.5B CMBS with six bond classes, each with its own margin and rating.

“CMBS deals tend to focus on strong, cash-flowing assets across a range of sectors, including residential such as our social housing platform Sage, logistics portfolios and hospitality portfolios. Certain high-quality office assets and portfolios also remain attractive,” Jay added.

More broadly, logistics-backed securitisations have underpinned the recovery. In February, Bank of America issued Taurus 2025-1 EU DAC, a roughly €260M deal backed by 37 pan-European logistics assets owned by Carlyle Group, while more recently Bank of America has launched a £227.3M CMBS, also collateralised by a portfolio of principally UK industrial properties owned by GoldenTree Asset Management.

GoldenTree acquired those properties in November from Abredeen Property Income Trust, and Bank of America originated the floating-rate loan backing the securitisation.

But deals like Haven and Vantage show that logistics isn't the only game in town.

“While the Haven deal was sponsored by Blackstone, it introduced a new asset class to the CMBS markets, and that in turn will give other holiday park owners encouragement that their portfolios may be valued higher because of the availability of alternative, cheaper debt,” Brookland partner and founder Nassar Hussain said.

“This transaction does not seem like a one-off. And increased liquidity in capital markets could benefit other sectors and, coupled with new issuers entering the CMBS market, should help drive higher CMBS issuance levels.”

Other than its scale, Blackstone’s U.S. heritage is likely to be a reason why it sees CMBS as a strong debt vehicle, given its far higher prevalence in North America.

“Europe followed the U.S.’ lead and had an active CMBS market until the Global Financial Crisis,” McCarthey Denning partner Conor Downey said.

“But since then, there has been a significant divergence. Light-touch regulation in North America compared with overregulation in the EU focused European activity on far fewer players, mostly private equity or banks closely associated with major private equity companies.”

Downey pointed out that the main challenge is that for a securitisation to mitigate risk effectively, it needs to be large, probably at least €300M, to even out possible discrepancies between underperforming and stronger-performing assets within the packaged debts. And in Europe, there are not that many very large portfolios available, and they are generally operated by private equity.

“Our sense is that this will continue,” Jay added. “The market has matured over time, with banks more confident in underwriting deals and new investors – including U.S. capital seeking relative value in Europe – entering the space. CMBS structures have also evolved to offer greater flexibility and protection for creditors, which should support further growth.”

“We expect the more deals brought to market, the more investors will consider investing in European CMBS. This, in turn,should increase liquidity and give banks and borrowers confidence, closing the circle,” he said.