Despite wider commercial mortgage-backed security spreads following commentary from the Federal Reserve earlier in the week, according to Barclays, higher capital charges from Basel III should continue to push banks buying into the agency CMBS sector.
However, overall, positive forecasts on 10-year-guaranteed agency CMBS do not change analysts’ expectations to see sluggish
For example, Moody’s Commercial Property Price Index shows “signs of property prices
The CPPI dropped 60 basis points month-over-month in an unexpected change that followed a consistently flat performance since February.
Since the data lag by a couple of months, analysts note, they do not take into account the negative impact of a 90 bp rate sell-off in June.
An interesting trend appears to emerge if one looks closely at individual property sectors.
Most notably, analysts observe, office CRE in central business districts is experiencing “a sharp slowdown,” compared to retail and suburban office sectors.
Meanwhile, apartment properties posted sharp price increases only 3% below the sector’s highs. This is associated with both “better financing available” via the agencies and “a significant improvement” in performance due to rent growth and occupancy.
