KBRA Releases Research - CMBS 2023 Sector Outlook: Continued Uncertainty
KBRA releases its CMBS 2023 Sector Outlook, which highlights key credit trends from 2022 and forecasts U.S. issuance activity for the new year. The report reviews the current lending environment and property fundamentals, as well as factors that may affect overall property performance in 2023. The report also discusses year-to-date (YTD) KBRA-rated CMBS conduit trends and metrics, takes a closer look at 2022 ratings activity, and outlines ratings surveillance expectations for 2023.
Lenders and investors have been scrutinizing deals more closely, reducing leverage, increasing pricing, or just moving to the sidelines as interest rates continue to rise. Borrowers appear to be retrenching and readjusting to the new reality of lower leverage and higher commercial real estate (CRE) mortgage rates, although some may just be waiting for rates to stabilize or even come down. In either case, market participants appear to be in a holding pattern.
Despite robust issuance as we entered 2022, the toll of rising interest rates, as well as its effect on the economic outlook, brought issuance levels down quarter-over-quarter for much of the year. Given the current interest rate and economic environment, we expect issuance volume will follow the 2022 quarterly trend and head lower in 2023.
Some key takeaways from the report include the following:
KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA's ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.
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