IEI - CMBS And The Fed... Is There A Crisis Brewing In The Office?

• The impact on non-agency CMBS defaults, using our Yield Book model to simulate the impact of commercial real estate price declines of 20%, 30% and 40%, over the next year.
• We find a 40% CRE price decline gives CMBS losses close to the levels seen for 2007/08 loan vintages after the GFC.
• But we note that the impact of the COVID-19 recession is concentrated in sectors that comprise almost 70% of CMBS collateral. This skews non-agency CMBS default risks to the high side of the GFC outcomes, when CMBS generally suffered less than RMBS.

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