CMBS: Steady fundamentals, stable credit quality expected in 2020
admin | January 10, 2020
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The CMBS market is projected to grow modestly in 2020, touching $100 billion in private-label CMBS, as low interest rates counteract high CRE valuations and investors continue to compete for originations. Low cap rates look relatively attractive as long as the macroeconomic environment remains supportive, and S&P analysts expect any ratings downgrades of CMBS to be due to property specific issues, not deteriorating fundamentals. The retail sector remains troubled, but the story is well known and conduit pool exposures fell to 22% in 2019 from 27% in 2018 (Exhibit 1). Hotels are facing their own headwinds after a record 10-year long expansion and that modest weakening is likely to continue. Hotel exposure in conduit pools has declined from 15% to 12% year-over-year, migrating to single asset/ single borrower (SASB) securitization where it comprises 20% of issuance. The S&P Global Structured Finance Outlook 2020 is here (subscription required). (S&P, APS)
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