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European CMBS market to grow 50% in 2002

EUROPE- Low interest rates in the Eurozone, increasing investor appetite and a broadening origination base have led rating agency Standard & Poor’s to predict a 50% growth in Europe’s commercial mortgage-backed securities (CMBS) market in 2002.

This expected growth will build on a successful 2001 which saw volumes more than double from $8.5bn to $18.7bn. Transactions almost trebled from 15 to 40 over the same period.

The U.K. retains the accolade of being the largest European market by ending 60% higher at $8.2bn compared with $5.1bn a year earlier. A total of 15 transactions were completed compared with eight in 2000.

Continental European CMBS activity was also higher according to S&P with Italy registering a six fold increase in volumes, up from $1.9bn to $7.3bn at the end of 2001.

Peter Hansell, director at Standard & Poor's Structured Finance Ratings group, says several transactions in continental Europe were particularly innovative in that they were executed on an individual country basis and tailored to specific markets and asset types.

"Deutsche Bank AG's Powerhouse Finance transaction, which was based on a sale and leaseback of staff accommodation for Electricité de France, the French electricity utility, was a clear example of how CMBS technology is being used by individual continental European jurisdictions," he says.

Both repeat issues and new market entrants will feature large in 2002. Says Hansell: "there is already a considerable volume of repeat issuance in the pipeline, which besides guaranteeing a minimum volume, also signifies the market's increased depth and maturity."

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