Bank lenders have captured significant market share from CMBS conduit lenders whose originations stalled in Q1 2016, shows a newly released CBRE report.
Banks accounted for 43 percent of non-agency CRE loan origination in Q1, upping their market share from 28 percent in Q1 2015. But CMBS conduits accounted for only slightly more than 10 percent of loan deal volume, way below the level of 18 percent Q1 last year and one of the lowest quarterly market shares in several years. (Life insurance companies accounted for 25 percent, matching their share from Q1 2015).
Thanks mostly to the banks filling that void, loan closings were up by nearly 9 percent year-over-year by the end of March.
CMBS issuance dropped significantly in Q1, totaling only $19 billion, which was down 29.5 percent from the year prior. CBRE did note however that rising loan maturities in the CMBS sector this year will likely boost the demand for financing as the year progresses. Though the company predicts that approximately 18 percent of the $78 billion scheduled to mature in 2016 may face some difficulty in refinancing.
CMBS spreads on new-issue 10-year AAA bonds widened over swaps of 170 basis points in early March, but tightened to a more normal level of 130 basis points in early April — only slightly above its 52-week average.
The report also shows that loan underwriting in Q1 2016 compared favorably with Q4 2015, as the percentage of loans carrying partial- or full-interest-only terms remained below the 60 percent mark for the second consecutive quarter.