March Non-Agency CMBS remained robust, but outlook darkens
Steve Baumgartner, Apr 2025 - 2 min read 
Image source: Pexels
Non-Agency CMBS Market Overview
Non-Agency CMBS issuance remained strong in March following an explosive February as issuers continued to bring new paper to market, which was met by strong investor demand. However, the current political uncertainty coming out of Washington has put a damper on the party, and this uncertainty has already begun to weigh on the Q2 outlook, with spreads widening and slower anticipated issuance volume.
Overall, March 2025 issuance volumes for the U.S. non-agency CMBS market reached $10.3 billion, which, while not as robust as February, remains in line with the strong deal flow we’ve observed since last summer.
Source: Commercial Mortgage Alert, Morningstar Credit
By the end of the first quarter, aggregate issuance totaled $37.5 billion, which is unsurprisingly the highest Q1 quarterly volume since 2007. Year over year, Q1 2025’s numbers are double those of Q1 2024, further illustrating the market’s impressive start.
Source: Commercial Mortgage Alert, Morningstar Credit
Deal Composition Analysis
Single Asset Single Borrower (SASB)
There were 9 Single Asset Single Borrower (SASB) deals in March totaling just under $6 billion, bringing year-to-date SASB issuance to $27 billion. This figure alone exceeds the total of all Non-Agency CMBS issuance in Q1 2024, highlighting the robust appetite for this market segment.
Conduit Deals
On the conduit front, another five deals for approximately $4.3 billion priced in March, marking back-to-back months of roughly the same deals by count and size. This demonstrates a stable appetite for the conduit product, which has been a consistent performer in the current environment.
Source: Commercial Mortgage Alert, Morningstar Credit
CRE CLO Market
Two CRE CLO deals priced in March for $2.1 billion, bringing year-to-date issuance to $8.35 billion. This nearly matches 2024’s total volume of $8.6 billion in just the first quarter, suggesting potential for significant growth in this segment throughout 2025 if the pace continues.
Source: Commercial Mortgage Alert, Morningstar Credit
Market Analysis and Outlook
The strong primary market performance in March demonstrated the resilience of the Non-Agency CMBS markets as issuers and investors aligned to continue the robust start to 2025. However, several factors suggest a potentially more challenging second quarter:
- Political Uncertainty: The ongoing political situation in Washington has introduced market volatility that could impact investor confidence.
- Spread Widening: Early indications in April show spreads beginning to widen, potentially leading to repricing across the CMBS landscape.
- Interest Rate Environment: With the Federal Reserve signaling a cautious approach to rate adjustments, borrowing costs remain a significant consideration for potential issuers.
- Property Sector Performance: Office and retail sectors continue to face challenges, while multifamily and industrial properties remain relatively strong performers in CMBS pools.
Conclusion
While Q1 2025 has set a blistering pace for non-agency CMBS issuance, market participants should be prepared for potentially increased volatility and more selective issuance in Q2. The strong fundamentals that drove the Q1 performance remain in place, but external factors may moderate the record-setting pace we’ve observed thus far.
For investors, the coming months may present both challenges and opportunities as market dynamics evolve in response to the broader economic and political landscape.
