Erratic Economy Could Disrupt CMBS Market via CoStar Group

While liquidity has been returning to the U.S. commercial mortgage backed securities (CMBS) market, current macroeconomic uncertainty has the potential to disrupt financing in 2012, according to forecasts from bond rating agencies Moody's Investors Service and Fitch Ratings.

Even if the Eurozone crisis moves forward from the present uncertainty, investors have plenty of other concerns, including the global economy's foundations are shaky with large trade imbalances, U.S. fiscal issues, lack of economic expansion, concerns of a hard landing for the Chinese economy, and tamed consumer spending. They could make for a potentially tentative lending environment with tighter lending standards and, as a result, lead to an overall lack of liquidity in the market.

The CMBS market depends on the availability of financing as term debt matures as much as the ability of commercial real estate properties to generate cash flow. A potential extended illiquid market would undermine the encouraging signs seen in property fundamentals in 2010 and 2011, which include increase in rent growth and occupancy levels in the multifamily sector, recovery in major metropolitan markets for the office sector, higher occupancy and revenue in the hotel sector, and the stabilization of the retail sector.

Read more...Erratic Economy Could Disrupt CMBS Market - CoStar Group