Since the Slowdown, All Vehicles Have Surged

By Jimmy Board, Senior Vice President, Jones Lang LaSalle Inc.

Transactions in all product types have surged from the economic slowdown of late 2008. Through the third quarter of 2011, the four primary asset classes have seen a combined 77 percent increase in volume.

By Jimmy Board,
Senior Vice President, Jones Lang LaSalle Inc.

As the new year begins, Jones Lang LaSalle continues to actively collaborate with lenders pursuing new borrower acquisitions, refinances and opportunistic ventures behind a wave of budgeted capital allocations for 2012. Transactions in all product types have surged from the economic slowdown of late 2008 through early 2010 and, through the third quarter of 2011, the four primary asset classes have seen a combined increase in volume of 77 percent for the year — $116 billion vs. $66 billion — already surpassing full-year sales volume figures of $113 billion in 2010.

The CMBS market specifically, while remaining smaller than initial 2011 projections because of European debt and domestic employment-growth uncertainties, saw issuance rise nearly threefold from 2010 levels of $13 billion. Additionally:

  • In 2011, CMBS volumes were $32.7 billion and are projected to rise modestly in 2012 to approximately $45 billion continuing the annual growth of the “CMBS 2.0” market.
  • Life insurance companies are expected to continue aggressive allocation amounts, as demonstrated over the last two years.
  • Through the third quarter of 2011, commitments total of $34.7 billion outpaced 2010’s annual total of $30.7 billion and is the most since 2007, when it reached $42.7 billion.
  • The second-quarter 2011 life-company volume of $15.7 billion was the highest quarterly number since 2001, and the third-quarter 2011 volume of $11.1 billion continued to fall in line with 2004-2007 levels of approximately $40 billion.

Stability in the European debt markets will remain an important factor of future market strength and the ability of the CMBS market to actively compete with life-company and balance-sheet lenders. Despite perceptions of CMBS pricing significantly wider than life company pricing, decreases in treasury yields have largely offset increased spreads, resulting in overall pricing back to near second-quarter 2011 levels. CMBS and life-company loan terms to borrowers, whether institutional or private-investor based, continue to place a great emphasis on asset type, location and real estate risk, with core market multifamily and office receiving the best terms. Generally speaking, CMBS lenders continue actively lending on commercial properties at up to 70 percent long-term value for refinances and 75 percent long-term value for acquisitions due to the presence of “new equity.”