CMBS industry to grow to half of peak

As the commercial mortgage backed securities industry rebuilds, professionals predict it will only grow to 50 percent of its $200bn peak in 2006.

The CMBS market is in the process of rebuilding itself from scratch, however market professionals have warned the second time round could see the industry grow to just 50 percent of its peak.

As real estate investors search for liquidity, commercial mortgage-backed security professionals have insisted the securitisation market is “never going to be what it was”.

Speaking at the annual winter forum of the Association of Foreign Investors in Real Estate, Peter Baccile, vice chairman of JPMorgan Securities, said he expected US CMBS issuance to grow to roughly $80 billion and $100 billion annually at most – down from $200 billion in 2006. The peak in domestic CMBS issuance was $237 billion in 2007.

However the CMBS industry came to a grinding halt in 2008, with Baccile saying, just like the 1990s, the securitisation market was “rebuilding … from scratch. It’s a replay of how the market was created”.

Initially focused on smaller assets with good cash flows in single borrower deals, Baccile said CMBS issuance would grow gradually to include multi-borrower and larger asset deals but it would take time, depending on the growth of the US commercial real estate market and the emergence of aggregators.

“Not everyone is going to get back into this business. [But] we will get there. We’re not there now.”