The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

The potential pitfalls in the growth of CMBS

As the commercial mortgage-backed securities market has grown in the past year some observers have raised concerns that risks are not being adequately priced and that the broader uptake of CMBS – including in collateralized debt obligation tranches – could prove hazardous. Most bankers dismiss such suggestions as nonsense.

"We have not yet been through a full cycle so it's impossible to know exactly how CMBS will perform," says Arvind Bajaj, head of the European real estate finance and securitization group at Credit Suisse First Boston in London. "But CMBS is about segregating and allocating risk: investors who want less risk are able to purchase more senior securities."

However, investors that understand property and want yield can find it in subordinate tranches:  where yields can be as high as 400 to 600 basis points. "These investors understand real estate and they want the additional yield," says Bajaj. "Therefore, risk is allocated to those that want it, and are best placed to understand it."

Similarly, although there are some concerns about CMBS going into CDOs – where they are in demand because of the yield pick-up they offer – because of the absence of specialist commercial real estate knowledge among CDO investors, bankers say this is not a problem.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree