CMBS Hits Highs in H1 2024 Issuance, Signaling Market Strength
Steve Baumgartner, July 2024 - 3 min read 
Image source: Unsplash, © Simone Hutsch, CC BY 2.0.
CMBS Primary Markets
U.S CMBS issuance in the first half of 2024 was very robust across almost all issuance types across the securitization spectrum with some products seeing more uptick than others. Aggregate issuance came in just under $68 billion which is roughly 70% of what was brought to market for the full year in 2023 showing strong signs of resiliency and growth.
Reduced volatility in treasury markets coupled with relative stability within ranges for credit spreads on securities has allowed for better clarity of pricing and therefore more execution. However, it is fair to say that changing expectations regarding the timing of rate cuts has put some downward pressure on issuance so with any luck upcoming economic data regarding inflation and other macroeconomic factors will provide more clarity and potentially lead to even greater issuance numbers over the second half of 2024.
Source: Commercial Mortgage Alert, Morningstar Credit
Non-agency CMBS Market
Non-agency CMBS issuance closed out the first half of 2024 approaching $45 billion in deals closing surpassing the totals for the full year in 2023 which only saw a little more than $40 billion in total taken to market.
Single Asset Single Borrower transactions continued to make up the bulk of issuance thus far in 2024 with roughly 70% of the deals by count and balance being SASB which in 2023 was closer to a 50/50 split. It remains to be seen how the composition of issuance breaks out between SASB and Conduit moving forward but it is clear that the demand for SASB combined with issuers ability to execute on these deals means they will continue to be a significant part of the market for the foreseeable future.
Source: Commercial Mortgage Alert, Morningstar Credit
Agency CMBS Market
Regarding the multifamily sector Agency CMBS issuance thus far in 2024 has about $20 billion which is running almost 12% behind the same period last year with the shortfall primarily due to lack of product and uncertainty of execution with the agencies in the current market environment. Interestingly there has been almost $1 billion of multifamily collateral in the nonagency conduit deals issued in the first half which is a shift as well as a sign of acceptance of multifamily as an important part of pooled conduit transactions when pricing is right.
Source: Commercial Mortgage Alert, Morningstar Credit
CRE CLOs
The first half of 2024 did see 4 CRE CLO transactions come to market for roughly $3.1 billion in volume or roughly a billion more than the corresponding period in 2023. Interestingly last year’s deals were all static pools while 3 of the 4 that came to market in 2024 were managed. This shows signs that investors are comfortable with that structure though likely highly focused on manager selection as part of the pre-trade process.
Summary
With 2024 being off to a strong start there are some signs of good things to come, and the forward-looking pipelines look primed to continue the trend. The U.S. macro picture continuing to show taming inflation numbers alongside a solid economic picture can go a long way toward accelerating volumes. Conversely the upcoming U.S. presidential election as well as other global conflicts and macro concerns generate significant uncertainty that could cause disruptions to the primary markets.
