Commercial Real Estate Direct Staff Report
The CMBS market bubble, whose inflation took years, popped just more than 10 years ago. Following a nearly two-year hiatus after that, the sector made its return and has been plodding along for roughly eight years.
What’s surprising is that securitized lenders continue to show discipline. There’s nary a sign of the frothiness that was so visible last time around.
CMBS issuance volumes have slowed and bond investors have pushed back on certain deals. There simply aren’t as many investors interested in the sector as before the Great Financial Crisis, so issuers have to tread carefully. Structured investment vehicles, proprietary trading desks and collateralized debt obligations that bought up bonds before the crisis either no longer exist or don’t ply the CMBS waters.
For the most part, lenders continue to underwrite loans based on existing collateral cash flow. That’s particularly true now that risk-retention rules are in place.