European CRE: FIG and CMBS Analysis Indicates Risks are Rising
This commentary looks at the European commercial real estate (CRE) market from a bank lending and CMBS perspective. The analysis focuses on current market challenges, property type exposures, and asset-quality metrics.Key highlights:
-- DBRS Morningstar expects the combination of higher funding costs, increased refinancing risks, and lower valuations to result in a higher probability of loans defaulting.
-- DBRS Morningstar's outlook for 2023 is negative for the office and retail asset types, but stable for the industrial, multifamily, and hospitality.
-- In the Nordics and Germany, CRE lending represents a significant portion of total lending; however, nonperforming loan (NPL) ratios are low, reflecting generally stronger asset-quality metrics and well-developed covered bond markets with stringent lending standards in these countries.
-- DBRS Morningstar anticipates that the level of new commercial mortgage-backed security (CMBS) issuance will remain limited in 2023 with multi-borrower transactions likely to emerge.
“DBRS Morningstar's cross-practice exposure analysis currently reveals a low level of defaults supported by conservative loan-to-value ratios and sponsors' ability to back distressed loans via equity injection” said Sonja Forster, Vice President of FIG at DBRS Morningstar. “However, DBRS Morningstar expects default and refinancing risk to increase and new CMBS issuance to remain subdued in H1 2023,” said Patrizia Catanese, Assistant Vice President of CMBS at DBRS Morningstar.
DBRS Morningstar will be hosting a webinar on this topic on Monday, 23 January 2023, at 4 p.m. CET, 3 p.m. GMT. Please register to attend or to view the post-event recording on the following link: /webcast/15677/570390.
DBRS Morningstar is a global credit ratings business with 700 employees in eight offices globally. DBRS and Morningstar Credit Ratings are committed to empowering investor success, serving the market through leading-edge technology and raising the bar for the industry.
Together, we are the world’s fourth largest credit ratings agency and a market leader in Canada, the U.S. and Europe in multiple asset classes. We rate more than 2,600 issuers and 54,000 securities worldwide and are driven to bring more clarity, diversity and responsiveness to the ratings process. Our approach and size provide the agility to respond to customers’ needs, while being large enough to provide the necessary expertise and resources. For more details visit us at dbrs.com.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.