A hunt for yield and a gradually improving property market are bolstering a key engine of U. S. commercial property lending, helping borrowers to refinance but also reigniting fears the market is getting overheated.
In all, lenders made $94 billion in loans bundled together and sold off as bonds to investors in 2014, the most since 2007 for the product known as commercial mortgage-backed securities, according to trade publication Commercial Mortgage Alert.
Real-estate executives andbankers are predicting that figure will rise in 2015. Eighty-eight percent of respondents to a survey by the CRE Finance Council, a trade group, predicted lenders would make at least $100 billion in CMBS loans in 2015, with 18% predicting issuance would rise above $125 billion.
The CMBS market is a significant – and volatile – component of the broader market for commercial-property lending. It tends to grow rapidly when times are flush as Wall Street banks and other lenders can quickly turn up production so long as there is demand from bond investors.
This post was published at David Stockmans Contra Corner on January 14, 2015.
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