Banks and alternative lenders are not shying away from commercial real estate debt in the tail end of this cycle.
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Lending continued to climb moderately in the second quarter, thanks in part to a large jump in commercial mortgaged-backed securities debt. Capital markets remain favorable, pushing lending volume up across all major groups, CBRE reports.
CMBS issuance jumped in Q2 to $38.8B year-to-date, well above the $30.7B in CMBS debt issued at the same period last year.
“The overall lending environment is well supplied with debt capital from all sources; CMBS, life companies, banks and alternative lenders are all actively issuing bridge and permanent financing quotes,” CBRE Capital Markets Global President Brian Stoffers said in a statement. “The recent surge in CMBS mortgages demonstrated that these lenders are becoming increasingly comfortable with risk-retension rules that kicked in at the end of last year.”
Some CMBS Background
In 2016, the CMBS market was in an uproar as strict lending regulations forced lenders to keep more money on the books when underwriting loans. Fear that this tightening would deter banks from issuing loans was rampant in 2016, but that uncertainty has lessened and the CMBS market has settled into the new standards. CBRE's Lending Momentum Index, which tracks the pace of loan closing, jumped 27% between March and June compared to the same period last year.
In June alone, CMBS lenders issued 451 loans worth $12.3B in debt — twice the value of CMBS loans issued in any other month this year and three times the 135 loans secured in May, according to Trepp research. These loans have been backed predominantly by office and mixed-use assets within core U.S. markets like New York, D.C. and Los Angeles.
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