Persistently low interest rates have been a
hallmark of what is now the longest economic recovery in US history. Monetary
policy has buoyed asset valuations and DSCRs, thereby helping the CMBS industry
through the 2016-2017 refinance wave.
Favorable underwritten leverage and debt yield make the market appear disciplined. However, lending competition is red hot, and credit by other measures has slipped. Loan sizing constraints have shifted to coverage, and now the vast majority of CMBS loans have interest-only terms. In addition, single-tenancy, especially in office properties, has become a growing concern, while the ongoing shake-up in the retail world makes underwriting loans on brick-and-mortar increasingly difficult. With strong fundamentals in many markets, construction has ramped up. The CRE CLO sector has also made a major comeback, providing liquidity to the transitional CRE property market.
All of these credit issues coincide with a unique political environment that so far has yielded support in regulatory and tax relief, but has at the same time generated concerns around other challenges such as labor shortages and international trade conflicts.
Moody’s US CMBS Briefing provides a unique platform to network and to gain insight from Moody’s analysts and senior industry leaders about the trends and issues relevant to assessing what’s coming next.