The Commercial Mortgage-Backed Securities (CMBS) market is expected to surpass issuance expectations in 2026. The primary driver of this new analysis is Single-Asset, Single-Borrower (SASB) transactions. With a CMBS volume exceeding $90 billion completed by early September, the market is on track to reach nearly $140 billion by the end of the year. This forecast comes from the analytics firm Trepp, which had originally anticipated activity of $130 billion for 2026. The CMBS market has been on an upward trend for two years, having already recorded significant volumes in 2025 at $126.6 billion and in 2024 at $108 billion.
Stephen Buschbom, Head of Applied Research and Analytics at Trepp, and Andy Boettcher, Head of Research, spoke to Commercial Observer on 20 August about current trends. Stephen Buschbom stated that stresses in the market have a long lag time. He referred to the 2008 financial crisis, where peak defaults were only reached four years after the AIG and Lehman events, and noted a similar development in the current situation. While the COVID-19 pandemic represented a different shock mechanism, the subsequent fundamental realignment of the office market will have long-lasting effects due to lease structures. He expects market stress to persist as leases expire and companies reassess their space requirements.
Buschbom further explained that Trepp had expressed hope in 2022, 2023, and 2024 that the market would stabilise or normalise by 2026. This would have restored lender confidence and boosted transaction volumes. This expectation has, fortunately, largely been met. Overall, CMBS issuance volume in 2026 is excellent, although its composition differs significantly from the pre-COVID era. There was already a trend towards SASB transactions after the Global Financial Crisis (GFC); however, in recent years, SASB has become the dominant origination channel. Of the approximately $92.6 billion in announced private sector CMBS issuances this year, about 75 per cent, or around $69 billion, were Single-Asset, Single-Borrower transactions.
Andy Boettcher elaborated on the demand side. Buyers such as pension funds or banks, which are mandated to hold triple-A securities, can build their desired portfolios more efficiently with SASB transactions. Whether they wish to be overweight or underweight in New York is easier to manage with SASB than through the conduit channel. This offers banks greater security in managing the risk of their direct exposures compared to their securities exposures. SASB allows them to manage their credit risk more precisely.
Regarding investor preference for Class A-minus or B-class office buildings, Buschbom commented that demand is lukewarm at best. He had hoped for a stronger 'trickle-down effect', both in terms of space demand and asset owners' willingness to invest, but this has not materialised sufficiently. Only a slight improvement has been noted marginally in the A-minus segment, which shows a clear path to justifying the necessary capital investments for renovations and maintaining operations at that high level. Tier 3 and 4 buildings remain largely ignored.
Data centres have been an important component of the CMBS market in recent years. Buschbom explained that it is difficult to determine the exact impact of broader sector concerns and an unusual wave of supply on spread widening. He noted that in June and July, three deals were priced in very quick succession. In the past, data centre deals were more staggered in time, typically every two to three months. The concentrated occurrence in a short period led to underwriting issues and a noticeable widening of spreads.
Andy Boettcher, who previously analysed lending conditions in the banking sector for the Federal Reserve, commented on the current situation. He noted that banks' commercial real estate exposures are repriced more frequently than CMBS exposures. Consequently, stress indicators appear more quickly in banks than in the CMBS sector. Banks have largely made provisions for their commercial real estate exposures and are once again 'more aggressive'. They recorded 3 per cent growth, which Boettcher described as a very healthy figure.
