CRE recovery may remain uneven

Commercial property managers may see an uneven recovery.

Many commercial property managers will experience a fractured recovery situation, as there are issues with loan quality for commercial mortgage-backed securities.

While this won't reach the low levels from five years ago, there will be an overall weakening next year, according to Moody's Investor Service's "US CMBS 2013 Outlook." CMBS will likely not see significant improvement until 2014, at the earliest.

The amortization levels for loans, as well as higher debt service coverage ratios, will increase next year, the report explained. This could be as much as $70 billion next year for new transactions.

"Higher DSCR helps reduce default risk during the term of a loan, and greater amortization helps reduce balloon risk when a loan matures," said Tad Philipp, director of commercial real estate research for Moody's. "The higher DSCR and faster amortization on current loans are both due to historically low interest rates."

There should be a stabilization of CMBS transactions that are outstanding, the report added. Upgrades and downgrades should be even, aiding the overall credit quality of the situation.

There also will likely be a slight lull in CMBS loans in a state of special servicing, a report from Fitch Ratings explained. This level already declined $6 billion during the third quarter.

Disclaimer: All data and information provided on this site is for informational purposes only. makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, opinions or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.