Is MF CMBS Showing Up Late to the Party?

NEW YORK CITY—Multifamily has captured a greater share of new CMBS issuance this year, with conduits backed by apartment properties accounting for 17% of originations in the first quarter, compared to 7% the year prior. However, a report from Standard & Poor’s raises the question of whether new issuance has come late to the party, although the sector’s fundamentals are still strong.

“Although we believe the outlook for property fundamentals over the next few years is still good, supply growth and increased home sales activity have started to slow things down in the multifamily sector,” write senior credit analyst Larry Kay and his co-authors at S&P. Citing the results from the most recent National Multifamily Housing Council quarterly survey of senior executives in the industry, they write that “apartment market conditions have been weakening. A market tightness index below 50 indicates that market conditions–including vacancies and rent increases–are softening, while a sales volume index below 50 signifies that property sales are slowing. Even though apartment activity is typically slow in November through January, the last time either of these two indices indicated improving conditions was in July 2013.”