Strong CMBS issuance and lower interest rates heading into the fourth quarter have put CMBS volume on track to exceed last year’s total. As of September 30, a total of $57.8 billion of U.S. CMBS transactions has priced, approximately $375 million below last year. However, about $20 billion in deals are teed up for the next few months, which would bring the total above last year’s annual $77 billion.
Loan originations are robust with interest rates for CMBS conduit loans at historic lows. As a result, the 2019 CMBS market is outperforming expectations. According to Commercial Mortgage Alert, a survey of 16 market experts predicted an 8% decline in 2019 volume to $71 billion. Many of the forecasters did not contemplate a decline in interest rates.
The CMBS market has been remarkably steady for the past seven years. Volume has ranged from approximately $70 billion-$90 billion annually during the period. Supply and demand have generally been in balance, resulting in relatively stable CMBS bond spreads. AAA-rated super-senior CMBS bonds have generally priced within a range of 80-100 basis points over the past two years, providing stable loan spreads to borrowers and no re-trading of loan spreads at closing.