The almost moribund European CMBS market has seen little issuance since 2007. As of the date of this article, only three issues have come out of Europe bringing the total CMBS issuance for 2010 to less than €3 billion. Thats a far cry away from the €100 billion plus figures that was seen at the height of the market.
This low volume of issuance appears to be a bit of a paradox within commercial real estate finance. For one, banks are not originating at anywhere near the levels they had done in heydays of the CMBS market; by all accounts, many of the banks have simply shut their doors to real estate finance. However, at the same time, pension funds, insurance companies and other fixed income investors continue to look for suitable fixed income products to meet their liability driven investment requirements. There have been numerous conferences with pension fund and insurance investors on panels saying that they want to see issuance of new real estate bonds. Weve seen this sort of thing before in the U.S. markets back at the end of the savings and loan crisis. At that point, CMBS came in and saved the day by opening up the larger capital markets to real estate investment at a time when banks were no longer in the real estate lending business. However, this time things are different; part of the problem is that the investor market is much more cautious now, given that some CMBS structures have not performed as well as others.