Year-to-date issuance in European CMBS is almost double that of the same period last year, standing at just over ?40 billion ($50.3 billion). German CMBS enjoying the lion’s share of the market, posing a direct challenge to the U.K.'s hegemony in the market for the first time.
Office and multifamily assets account for nearly 70% of the European CMBS market this year, said Ganesh Rajendra, head of European securitization research at Deutsche Bank, with the multifamily market in particular enjoying solid growth due to the proliferation of German refinancing securitizations. “With property yields in the UK being squeezed in some cases to sub-borrowing cost levels, the outlook for loan demand and therefore CMBS financing volumes is arguably weaker than at anytime in the recent past,” he said of the shift in the U.K.'s market position.
The office sectors continue to enjoy solid rental growth and capital appreciation, while the conduit CMBS market is experiencing improvement credit performance, with coverage ratios good and portfolio LTVs stable. “Given this strength of underlying property markets, we see the risks to CMBS over the foreseeable term if any being related to deficits in tenant creditworthiness rather than real estate risks,” he added. He also said the predicted lightness of deal flow in the next few weeks is expected to be more spread supportive.