- Private-label CMBS issuance jumped nearly 165% in 2024, reaching $104.05B, marking the largest YoY dollar increase since 2005.
- Most 2024 CMBS issuances were single-borrower, floating-rate loans, reflecting expectations that SOFR has peaked and may decline.
- Much of 2024 activity has been driven by refinancing, as many owners face maturing loans amid a sluggish property sales market.
- By 2026, $1.78T in commercial mortgages will mature, with many loans failing to meet minimum DSCR requirements.
- Multifamily loans from 2021 to 2022 face the most stress, with many owners unable to secure refinancing under current terms.
Commercial real estate liquidity began to recover in 2024, according to Trepp’s year-end analysis, signaling a shift from the previous year’s market stagnation.
Deal Details
After a period of significant restraint, lenders are starting to re-enter the market, offering new financing opportunities, per GlobeSt. Private-label CMBS issuance surged by 165%, from $39.3B in 2023 to $104.05B in 2024, the largest single-year increase since 2005.
The biggest contributor to this surge is the rise in single-borrower transactions, which accounted for two-thirds of CMBS issuance in 2024. These loans have primarily been floating-rate, which indicates many expect the Secured Overnight Financing Rate (SOFR) peaked.
Rate Expectations
Despite this optimism, the future remains uncertain. Projections from Chatham Financial and Derivative Logic indicate SOFR rates will likely continue to fall this year, before rebounding in 2026.
Higher CMBS issuance has also been largely driven by refinancing, a logical response given the broader slump in sales and the recognition that many commercial mortgages are reaching maturity. In 2024, 18 of the issuances exceeded $1B, and there’s been a shift to shorter-term, 5-year mortgages—owners opting for shorter terms to avoid locking in higher rates for longer periods.
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What’s Next
While liquidity is returning to the market, it doesn’t signal a return to reckless lending. As property owners face maturing loans, the need for refinancing is high.
However, many of these loans were originally underwritten at much lower interest rates and now face challenges meeting minimum Debt Service Coverage Ratios (DSCR). Over the next few years, $1.78T in commercial mortgages will mature, with the highest-risk loans underwritten with lower DSCRs.
The risk is particularly high for loans originated between 2021 and 2022, especially in the multifamily sector.
