Investors have showed minimal appetite for commercial mortgage backed securities (CMBS) in recent times with only $10 billion in US CMBS issues in Jan-Apr 2008. Volume is a fraction of the $79 billion in bonds that sold during the first four months of 2007 according to Commercial Mortgage Alert.  The general consensus at the Commercial Mortgage Securities Association meeting in New York last week was that an estimated $50 billion of CMBS will be issued in 2009 versus $224 billion in 2007. This volume would put production in line with 2002 levels of $52 billion.

Experts say a likely upswing won’t occur until early 2009 at best at which point CMBS bond prices should be stable enough for investors to jump back in.  However, CMBS fundamentals are quite healthy and the delinquency rate is only 0.35%!

As a result of the credit crunch, total commercial real estate transaction volume is off 74% YTD as of April 2008 compared to 2007 levels. Until capital is more readily available transaction volume will likely remain slow.