With relatively low interest rates, strong market appetite for CMBS securities and the beginning of a period of high CMBS conduit loan maturities, originators are predicting strong CMBS conduit loan growth in 2015. Forecasts are for approximately $125 billion in conduit lending in the United States compared with $94 billion closed in 2014.
“With approximately $73 billion in CMBS conduit loan maturities occurring in 2015 (see our 12.12.14 post, “Mountain of CMBS Conduit Loan Maturities Presents Origination Opportunity”), together with incremental originations from other sources, this level of business for 2015 looks readily achievable,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “We have a very full first-quarter pipeline of about $65 million, up 25% from a year ago, so we appear to be paralleling growth in the overall CMBS market.”
If interest rates remain at today’s attractive levels, which are now in the 4.0%-4.5% range for 10-year CMBS conduit loans, the $125-billion projection for 2014 might actually be exceeded. The actions of the Federal Reserve on interest rates in 2015 may play a role; if the Fed does not increase short-term interest rates until later in 2015 or if the increase in short-term rates does not result in an increase in long-term rates, 2015 could be a blockbuster year.
Headwinds that might negatively impact 2015 CMBS conduit origination totals include the decline in oil prices dampening loans in oil-related markets, an increase in either the swap rate or CMBS bond yields resulting in interest rates over 5% to borrowers and global dislocations.