KBRA Releases CMBS Research – 2021 Sector Outlook: Slow and Steady

NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) releases its 2021 CMBS Outlook, which examines and provides forecasts for issuance activity in the new year. The report also provides a review of the current lending environment and property fundamentals, as well as factors that may affect property performance in 2021. The report also discusses year-to-date (YTD) KBRA-rated CMBS conduit trends and metrics, and takes a closer look at 2020 ratings activity.

While COVID-19 has significantly affected volume and will continue to affect future issuance, there are factors that may support the pipeline, including GDP growth, an effective vaccine distribution, and low interest rates. Key takeaways include the following:

• We expect CMBS issuance of $60 billion in 2021, which is slightly higher than the projected year-end (YE) 2020 level of approximately $53 billion to $55 billion.
• Among the major property types, we expect a continuation of solid demand for multifamily assets, industrial (more specifically last-mile distribution centers), certain pockets of office that have tenants with good credit, and essential retail.
• Regarding credit metrics for KBRA-rated conduit loans, leverage is down in 2020, while interest-only periods are up. As of October 2020, over one-third of the loans originated since April 2020 were structured with a debt service reserve (DSR). While this level is considerable, it appears to be trending down as the year progresses, based on recent KBRA-rated deals.
• During 2020, KBRA effectuated more than 3x the combined number of downgrades from all the previous years since KBRA has been rating CRE securitizations. Despite this, 93.8% have been affirmations and less than 1% of all AAA to A ratings were affected.

Click here to view the report.

Related Publications

• CMBS Interest Shortfalls Rise in COVID’s Wake
• CMBS Loan Performance Trends: October Update
• CMBS Trend Watch: October 2020
• Pandemic CMBS: Originating Through the Contagion
• CRE CLO: Early COVID Test Results Are In

About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA. Kroll Bond Rating Agency Europe is located at 6-8 College Green, Dublin 2, Ireland.