This year’s rapid interest rate hikes, combined with cap rate movements, put the squeeze on commercial real estate, with about $5.5B, or 28% of new CMBS issuance, suffering from negative leverage during the third quarter of 2022, according to a report by Moody’s Analytics.
For those deals, the cost of debt exceeds projected returns on investment.
The amount of CMBS exhibiting negative leverage was only 8% in the second quarter of this year, Moody’s noted. During Q3 2021, the total was a mere 2%.
The third-quarter jump was seen across asset classes, but industrial and multifamily have the largest share