NEW YORK--(BUSINESS WIRE)--Positive momentum will likely continue for U.S. CMBS heading into next year, according to Fitch Ratings in its outlook report for U.S. structured finance.
CMBS loans may face macroeconomic pressures in 2013 particularly if the fiscal cliff is not resolved. That said, 'CMBS has seen a wave of positive momentum dating back to 2010, which coupled with past rating actions will provide ratings stability next year, particularly for investment-grade CMBS,' said Managing Director and Group Head Huxley Somerville. If the macro environment remains stable, CMBS financing will expand. However, 'A substantial increase in CMBS financing is unlikely in 2013 and the industry will be the stronger for it,' said Somerville.
The continued stabilization of the commercial real estate market is very dependent on the CMBS market. This makes the looming fiscal cliff a bit of a concern. The macro environment is likely to turn negative if fiscal cliff fallout takes place. If it meant prolonged market illiquidity, then property fundamentals would be at risk, which in turn may lead to some weakness in CMBS collateral performance. The prospect of rating downgrades in that scenario would be marginal, with lower-rated tranches likely to absorb most of the ripple effect.
From the standpoint of property types, income growth for both hotels and multifamily properties has been strong over the past three years and next year they may reach earlier peaks. Performance is likely to be mixed for both office and retail properties. Major metro office markets will continue to see rental growth while smaller and suburban markets will continue to exhibit weakness. As for retail, strong properties will dominate weaker rivals which will continue to suffer substantial declines in value if they lose tenants.
Additional information is available in Fitch's report, 'U.S. Structured Finance 2013 Outlook: Tailwinds Prevailing Despite Potential Drag', available at 'www.fitchratings.com or by clicking on the link at the end of the press release.
Additional information is available at 'www.fitchratings.com'.
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U.S. Structured Finance 2013 Outlook: Tailwinds Prevailing Despite Potential Drag