The Trepp survey for the week ending October 17 showed average spreads widening as much as 15 basis points, with the average breaking the 130-basis-point barrier. The implied rate for ten-year, modestly leveraged commercial real estate mortgages equaled 3.75 percent—89 basis points lower than at year-end 2013. With just weeks to year-end, borrowers and lenders alike are focused on getting deals papered and closed; discussions regarding allocations and lending for 2015 will just have to wait.
Asking Spreads over U.S. Ten-Year Treasury Bonds in Basis Points | |||||||
| 12/31/10 | 12/31/11 | 12/31/12 | 12/31/13 | This week (10/10/14) | Last week (10/3/14) | Month earlier | |
| Office | 214 | 210 | 210 | 162 | 148 | 134 | 141 |
| Retail | 207 | 207 | 192 | 160 | 127 | 128 | 138 |
| Multifamily | 188 | 202 | 182 | 157 | 133 | 127 | 137 |
| Industrial | 201 | 205 | 191 | 159 | 137 | 127 | 137 |
| Average spread | 203 | 205 | 194 | 160 | 139 | 129 | 138 |
| 10-year Treasury | 3.29% | 2.88% | 1.64% | 3.04% | 2.36% | 2.47% | 2.53% |
The Cushman & Wakefield Equity, Debt, and Structured Finance Group’s monthly Capital Markets Update of commercial real estate mortgage spreads dated September 11, 2014, showed spreads increasing 10 to 15 basis points across the board compared with the prior survey (dated July 4) as lenders seem to be trying to make up some ground after the “great low spreads due to low Treasury yields giveaway” of the past few months. Even with the uptick in rates, it remains an attractive time to finance or refinance commercial real estate.
| Year Fixed-Rate Commercial Real Estate Mortgages (as of September 11, 2014) | |||
| Property | Maximum loan-to-value | Class A | Class B/C |
| Multifamily (agency) | 75–80% | T +160 | T +170 |
| Multifamily (nonagency) | 70–75% | T +160 | T +165 |
| Anchored retail | 70–75% | T +190 | T +200 |
| Strip center | 65–70% | T +190 | T +200 |
| Distribution/warehouse | 65–70% | T +175 | T +200 |
| R&D/flex/industrial | 65–70% | T +195 | T +205 |
| Office | 65–75% | T +185 | T +190 |
| Full-service hotel | 55–65% | T +250 | T +270 |
| Debt-service-coverage ratio assumed to be greater than 1.35 to 1. | |||
Year-to-Date Public Equity Capital Markets
Dow Jones Industrial Average: –1.18 percent
Standard & Poor’s 500 Stock Index: +2.08 percent
NASD Composite Index (NASDAQ): +1.96 percent
Russell 2000: –6.69 percent
Morgan Stanley U.S. REIT Index: +12.08 percent
| Year-to-Date Global CMBS Issuance (in $ billions as of 10/17/14) | ||
| 2014 | 2013 | |
| U.S. | $72.2 | $65.9 |
| Non-U.S. | 2.3 | 9.5 |
| Total | $74.5 | $75.4 |
| Source: Commercial Mortgage Alert. | ||
Year-to-Date U.S. Treasury Yields
| U.S. Treasury Yields | |||
| 12/31/12 | 12/31/13 | 10/17/14 | |
| 3-month | 0.08% | 0.07% | 0.03% |
| 6-month | 0.12% | 0.10% | 0.06% |
| 2-year | 0.27% | 0.38% | 0.34% |
| 5-year | 0.76% | 1.75% | 1.37% |
| 7-year | 1.25% | 2.45% | 1.75% |
| 10-year | 1.86% | 3.04% | 2.18% |
