Exposure to retail declines in new issue CMBS

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The number of retail mortgages being bundled up with other loans and sold on to investors has plummeted in the first quarter of 2017, as long-term woes in the sector have been compounded by a flurry of store closure announcements.

The first quarter of 2017 saw an average of 22 per cent retail exposure among the pool of loans in conduit – or multi tenant – commercial mortgage backed securities (CMBS), compared to 35 per cent in the fourth quarter of 2016 and 30 per cent for the whole of 2016, according to S&P Global, a ratings agency.

In contrast, the number of office loans in deals increased dramatically, from 32 per cent in the final three months of 2016 to 46 per cent in the first quarter of 2017.

Office Reits, which own or finance real estate allowing investors to get exposure to the sector through owning the company’s stock, have outperformed many of their real estate peers since the US election, rising over 11 per cent, compared with a decline of 6 per cent for retail Reits.

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