SASB deal backed by iconic asset suggests much more in store from rehabilitated CMBS market

On Thursday, sponsor Tishman Speyer priced the largest single asset, single borrower (SASB) CMBS deal of the year so far -- a $3.23bn transaction backed by the iconic Rockefeller Center in Midtown Manhattan.

The rock solid execution shows just how much demand is out there for CMBS, an asset class that has suffered like few others in the wake of the pandemic and then higher interest rates.

Sure, the Rock Center is such a star property that even GlobalCapital's owners (then Euromoney Institutional Investor, today Delinian) opted to relocate their journalists to one of the offices there back in 2022. But still, the deal will set the tone of the SASB market moving forward.

Getting such a massive $3.23bn deal over the line, not to mention garnering over $8bn of demand for the $1.8bn senior tranche alone, is a stark contrast to the dark days of last summer and fall -- when the CMBS market was hardly functioning, and office scares dominated headlines.

Today, SASB CMBS is more than just functioning. It's running like a well-oiled machine.

It is quite remarkable for a deal of the Rock Center's size to achieve such oversubscription.

Furthermore, the deal got done even before the Fed's rate-cutting cycle has begun in earnest, with promises of more to come.

That shows there is still plenty in store for the CMBS market as rates go lower.

Transaction activity will pick up, and valuations will also rise, giving confidence to both borrowers and CMBS investors.

For investors it is a unique opportunity, too. Expect more buyers flock to CMBS to try and catch up with its returns, as spreads in other securitized and unsecured asset classes look tight.

These drivers of demand factors meet a CMBS market that has plenty of supply to offer, as banks are still cautious about commercial lending.

Taken together, the CMBS market is ready to rip into 2025.