The Trepp survey for the week ending October 24, 2014, showed average spreads basically unchanged, with the implied rate for ten-year, modestly leveraged commercial real estate mortgages equaling 3.64 percent—100 basis points lower than year-end 2013. With just over eight weeks to year-end, the focus is solely on getting deals done, period, with plans for 2016 put on the back burner.
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 (10/17/14) | Last week (10/10/14) | Month earlier | |
| Office | 214 | 210 | 210 | 162 | 149 | 148 | 141 |
| Retail | 207 | 207 | 192 | 160 | 140 | 137 | 138 |
| Multifamily | 188 | 202 | 182 | 157 | 137 | 133 | 137 |
| Industrial | 201 | 205 | 191 | 159 | 140 | 137 | 137 |
| Averagespread | 203 | 205 | 194 | 160 | 142 | 139 | 138 |
| 10-yearTreasury | 3.29% | 2.88% | 1.64% | 3.04% | 2.22% | 2.36% | 2.57% |
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.
30-Year Fixed-Rate Commercial Real Estate Mortgages | |||
| Property | Maximumloan-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: +1.38 percent
Standard & Poor’s 500 Stock Index: +6.29 percent
NASD Composite Index (NASDAQ): +7.35 percent
Russell 2000: –3.83 percent
Morgan Stanley U.S. REIT Index: +15.74 percent
Year-to-Date Global CMBS Issuance (in $ billions as of 10/24/14) | ||
| 2014 | 2013 | |
| U.S. | $74.7 | $67.1 |
| Non-U.S. | 2.3 | 10.3 |
| Total | $77.0 | $77.4 |
| Source: Commercial Mortgage Alert. | ||
Year-to-Date U.S. Treasury Yields
U.S. Treasury Yields | |||
| 12/31/12 | 12/31/13 | 10/2/14 | |
| 3-month | 0.08% | 0.07% | 0.01% |
| 6-month | 0.12% | 0.10% | 0.05% |
| 2-year | 0.27% | 0.38% | 0.39% |
| 5-year | 0.76% | 1.75% | 1.49% |
| 7-year | 1.25% | 2.45% | 1.75% |
| 10-year | 1.86% | 3.04% | 2.28% |
