Commercial Mortgage-Backed Securities Going to Zero

Okay, the commercial mortgage-backed market isn’t going to zero, but it’s sure in utter decline. This stat from Commercial Mortgage Alert corroborates something I heard a few weeks from a commercial mortgage market insider at a major bank:

Issuance of US commercial-mortgage-backed securities fell to $6.3bn in October, down 84 per cent from a record $38.5bn in March… The decline in CMBS issuance is crucial because such securities have provided an estimated 40 to 60 per cent of financing for new commercial property purchases in recent years.

Remarkable stuff.

[via FT]


  1. James Kahler says:

    Those statistics feel about right based on my experience with the CMBS markets this year. It’s nearly shut down. Asset fundamentals are somewhat irrelevant. A big part of the problem is the ABCP > SIV > CLO > CMBS chain. Costs of funds went up across to boards as we all know, ultimately shutting down the system as new SIV’s and CLO’s are not getting formed. These were the guys providing the bid in recent years for the CMBS product. B piece CMBS investors (who regulate what loans get into the pools) also saw costs of funds widen and they are clamping down by kicking out all kinds of loans, further reducing conduits’ appetite to take risk. Everyone I talk to just comments that 2008 is going to be a tough year. I fully agree. The whole system is broken and that doesn’t get fixed quickly.
    On the flip side, CMBS had pushed out a lot of natural lenders, such as life co’s and banks. Those guys–primarily the life co’s–are extremely active right now in the commercial space.