CMBS: European renaissance

The rise of ‘unrated’ CMBS and growing activity in markets like Italy show the European market is undergoing a renaissance.

The number of commercial real estate transactions in Europe is expected to rise exponentially by the end of the year. The appetite among investors for packaging the purchases of commercial real estate into bonds has soared and, as the market re-opens after a summer lull, the demand for commercial mortgage-backed securities (CMBS) in Europe could rise dramatically.

Goldman Sachs and Deutsche Bank priced European CMBS transactions in the same week at the end of July, and current activity suggests that, by the end of the year, we could hit a post-crisis peak in the European CMBS market. 

Despite the anticipated increase in European activity, the US is still the most attractive destination for commercial real estate investment. US CMBS returns for the year ending April 2015 outpaced the performance of the Barclays Aggregate index of US bonds. At the same time, severe market disruption resulting from the Greek crisis contributed to delays in a number of CMBS transactions.

Source: IPE Real Estate