The mood at the Commercial Mortgage Securities Association's Investors Conference is unsurprisingly a bit different than a year ago. Last January, the industry was still on the ascendancy. It had just finished a year in which nearly $300 billion in new CMBS issuance had occurred in addition to $39.8 billion in commercial real estate CDOs.
In the end, 2007 did set a new record with $315 billion in CMBS issuance and CDO volume came in at $39.3 billion. Things slowed down significantly in the second half of the year as a result of the credit crunch. As a result, expectations are that volume will drop all the way down to $100 billion to $150 billion this year and with almost no issuance at all of new CDOs. That's going to create opportunities for other lenders--like life insurance companies and portfolio lenders.
There are also concerns that the underwriting in the past two or three years will come back to haunt CMBS investors more than older vintages. But there's no consensus on the scale of the problem. All that anyone can agree to is that there are a lot of reasons to believe commercial real estate's problems won't come close to rivaling what's occurred on the residential side.
Consider the following figures:
| categories | CMBS | ABS |
| Market Size | $650B | $600B |
| Delinquencies | 6.4% | 24.5% |
| LTV | 69% | 80% |
| Loan Size | $15.8M | $185,000 |
| Loan Term | 10 years | 30 years |
| Monitoring | Asset-by-asset | Statistical Modeling |
In all, expect a slow start to the year for CMBS. But with any luck, credit markets will stabilize and CMBS issuance should kick back into gear by the second half of the year.