With an expected increase in CMBS issuance for the next six weeks, CMBS volume appears to be on track to hit $56 billion for the first six months of 2015, up 38% from $40.6 billion recorded in the first half of 2014. That would keep full-year volume on pace to reach the $125 billion forecast by industry pros at the beginning of the year. While the annualized pace would appear to be short of $125 billion, the second half of the year is typically more active than the first, putting the goal of $125 billion within reach.
The direction of interest rates will likely play a role in whether CMBS volume continues strong in the second half of 2015; with the Federal Reserve apparently willing to push interest rate increases into the latter part of 2015 or perhaps even into 2016, the balance of 2015 could remain extremely busy. In addition, CMBS spreads have remained quite stable, providing confidence to borrowers that their interest rate at closing will remain within a tight range during the 45- to 60-day period it takes to process a CMBS conduit loan.
However, should any significant volatility in the fixed-income market negatively affect CMBS spreads and/or Swap rates, there could be an increase in loan rates to borrowers that would slow down originations to the point where $125 billion in full-year originations is not achievable. But for now, it’s full steam ahead.