Fitch Ratings said Monday that the annual default rate for commercial mortgage-backed securities reached 0.9% in 2013, the lowest level since 2008 and 26% lower than in 2012. The numbers point to a stable CMBS market with ample liquidity, Fitch said.
Fitch Ratings reports that the number of commercial mortgage-backed securities delinquencies declined in July to the lowest level seen since the end of the recession. There are still troubled areas, though, the ratings agency said. "Office properties in secondary and tertiary markets remain a challenge, as do retail malls with struggling sales and nearby competition," according to Mary McNeill, managing director at Fitch Ratings.
Fundamentals in commercial real estate are solid, accounting in part for the return of commercial mortgage-backed securities, according to panelists at the DLA Piper 11th Global Real Estate Summit. Right now, CMBS players are financing deals in the top markets, but they are expected to move into the top 30 markets. "U.S. commercial real estate markets are viewed as stable havens; real estate cap rates will also remain steady," said Jay Epstien, DLA Piper U.S. Real Estate Practice chairman.
Citigroup, Morgan Stanley, Bank of America and Wells Fargo are increasing their lending allocation for the European property market as local sources of capital contract. This constitutes higher-margin lending for the banks, whose presence is expected to boost the commercial mortgage-backed securities market as well.