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CMBS Debt Issuance Shoots Up To Start 2024

Confidence surged in the CMBS market during the first quarter, with more than $17B of loans issued, nearly triple the value of CMBS loans priced in Q1 2023, according to Trepp.


First-quarter CMBS issuance was the highest since the second quarter of 2022, when $20.6B in deals were priced. It was up 39% from the fourth quarter, with the nearly $18B of CMBS debt issued spread across 23 conduit and single-borrower transactions.

More than 13% of the Q1 total came from one deal, the refinancing of a 186-property, 16.6M SF industrial portfolio acquired by Blackstone Real Estate Partners in 2019. The original securitization was approaching maturity, Trepp reported.

Blackstone-owned properties dominated the first quarter of CMBS lending, with five $1B-plus deals priced, according to Trepp. 

Spreads also tightened in Q1, reflecting investors’ desire for lower risk, shrinking from 145 basis points more than 10-year Treasury yields to just over 90 basis points in the latest CMBS conduit deals this year, according to Trepp. Loans for apartment properties surged in the first quarter, backing almost 19% of the issuances, up from 8.9% last year, according to Trepp. Office loans accounted for 13% of the CMBS conduit deal volume.

While still short of historical norms, S&P Global analysts said in a January report that private-label CMBS issuance volume could go up as much as 30% this year. Last year, CMBS issuance was hammered by inflated interest rates, brewing concerns over the health of the U.S. office market and fears of a regional banking crisis, Commercial Property Executive reported. But stronger underwriting on new issuance, which allows projects to cash flow at higher interest rates, is luring investors.

“There is strong demand from CMBS bond investors because they like that new underwriting is thorough,” Gantry principal Mark Ritchie told CPE.

Legacy CMBS loans, on the other hand, have seen mounting troubles this year. CMBS loans delinquent for 60 or more days totaled $1.2B in February, up from $1.1B a month before, with office and mixed-use loans taking up the largest share, CPE reported.

S&P Global projected that prolonged elevated interest rates in 2024 meant that commercial real estate “will remain effectively in recession” due to higher cap rates and lower valuations.

“The office sector remains in deep distress,” S&P analysts wrote in the report. “Until office market fundamentals … improve or at least bottom out, the sector will effectively remain unfinanceable.”