CMBS Experiences a Q2 Climb

Matthew McGovern Director, GRS | Corteq (646) 760-0851mmcgovern@grs-global.com

Matthew McGovern
Director, GRS | Corteq
(646) 760-0851
mmcgovern@grs-global.com

Good news for commercial real estate borrowers came from CBRE recently.

Commercial loan closings rose 27 percent year over year during the second quarter, reported the commercial real estate services firm.

Much of this had to do with a spike in CMBS issuances, which hit $38.8 billion year to date, a jump from $30.7 billion over 2016’s first half. CMBS reportedly accounted for 36 percent of commercial-loan issuances during the second quarter, a spike from only 16 percent in the first quarter.

And all of this happened with two interest-rate increases by the Fed this year.

In a press release, Brian Stoffers, Global President, Debt & Structured Finance, CBRE Capital Markets, said: “The recent surge in CMBS mortgages demonstrated that these lenders are becoming increasingly comfortable with risk-retention rules that kicked-in at the end of last year.”

This follows some other recent favorable CMBS news earlier this summer, when Trepp reported that delinquencies were not nearly as dire are initially anticipated. As it turned out, delinquencies were down in July. At 5.49 percent, they decreased 26 basis points from June, though year over year, CMBS delinquencies were 73 basis points higher. Multifamily fared the best in July, falling 101 basis points, to 2.91 percent, while industrial dropped 61 basis points, dropping to 6.96 percent.

Back to the lending side, following CMBS, life companies accounted for 24 percent of all activity, while banks were at 18 percent. These numbers are interesting because life companies, though up 20 percent from the same year-ago period, fell from their 38 percent Q1 share. Banks’ share especially plunged – they accounted for 50 percent of a commercial lending activity during the second quarter in 2016.

The rise in overall commercial real estate lending and drop in delinquencies mirrors favorable overall macroeconomic news. Unemployment is at a 16-year low, at 4.3 percent, with 209,000 jobs added in July. Meanwhile, GDP growth is forecast to jump 3.7 percent in the third quarter, according the Atlanta Federal Reserve. And on top of that, it was reported last month that consumer confidence hit a 16-year high as well.

There is a lot of worry about a bubble and how long these strong figures can last, but the current strong commercial real estate industry and overall economy is certainly better than the alternative.

About GRS Group

GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions. 

Through the company’s proprietary management process, Global Services Connection, GRS Group delivers an integrated suite of services including Financial Advisory, Transaction Management, Assessment and Title Insurance.  We provide a single point of contact, capable of leveraging the GRS Group portfolio of companies, and delivering customized solutions to assist our clients in achieving their investment goals.

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