Improving industrial performance in the US could result in the sector becoming a larger part of commercial real estate lending through the CMBS markets, according to a new report from data and research firm Trepp.
While industrial loans make up the smallest portion of maturing volume among major property types, just 3.8% ($1.3bn) of 2015’s remaining maturities, this will “rise dramatically over the next two years,” bringing an expected $13.2bn of industrial maturities between 2016 and 2017.
Industrial CMBS issuance will pick up as a result. In one recent example, the former CalWest Portfolio was refinanced into three new single asset/single borrower deals totaling $2.8bn in 2015, accounting for 67% of year-to-date industrial CMBS issuance.
Industrial conduit CMBS origination has already grown dramatically in recent years along with the broader CMBS market, from just over $300m in 2010 to $1.7bn through August 2015. Combined with large loan and single asset/single borrower CMBS deals, total year-to-date industrial issuance is $4.6bn, a 42% increase from the $3.2bn total for all of 2014.
Meanwhile, industrial delinquency rates have declined from a 12.74% peak in mid-2012 to the current 6.18%.
The list of factors leading to improving industrial performance is long: a shifting e-commerce landscape, ‘spillover effects’ from automobile and housing construction, increasing GDP, job creation, cheaper domestic energy prices, rising M&A activity.
As a result, vacancy rates in US industrial properties have now fallen in the past 22 straight quarters to 6.4% as of Q2 2015, according to Colliers.