Commercial mortgage-backed securities to rebound in 2011
This year is positioned to be a stronger year for commercial mortgage-backed securities, as industry analysts say the sector hit bottom in 2010. Although, the market still remains far short of its highest point. Moody's Investors Service expects CMBS issuance will grow to $37 billion in 2011, with an estimated $13 billion in the first quarter alone. Four years ago, CMBS issuance reached $230 billion. The firm also said CMBS portfolios will be larger and more diversified than previous years. "With 2008 and 2009 posting dramatic drops in issuance from the peak of the market in 2007, 2010 marked a resurrection of sorts for CMBS," Moody's wrote in a recent report. "Based on what is already in the (first quarter) pipeline, Moody's anticipates these trends will continue and accelerate." The hotel and multifamily sectors will continue to recover throughout the year, according to Moody's. Because pricing is so volatile in these sectors, they are usually the first to feel the effects of an economic downturn, but also the first to rebound. Other sectors will lag a bit with regard to recovery, but all outlooks remain positive. "Office, retail and industrial market fundamentals will start to form a bottom in 2011, with a strong rebound not expected until 2012," Moody's said. CMBS delinquencies increased 2% in December, capping off the year at $62.32 billion worth of delinquent loans, according to Realpoint, a credit rating agency. This figure is up 50% from 2009 when CMBS delinquencies totaled $41.6 billion. Although delinquencies increased across all sectors, the firm said new issuance in 2011 will offset delinquency growth. "As liquidations of severely distressed defaulted loans picked up speed in the latter half of 2009 into 2010, and modifications or forbearance at the loan level continue to be discussed between borrowers and special servicers, there may be a delinquency 'leveling-off' period through year-end 2010 or early 2011," Realpoint said. Write to Christine Ricciardi. Follow her on Twitter @HWnewbieCR.