New European CMBS issuance soared in 2025 to €8.7 billion in 17 transactions across multiple sectors, against €2.2 billion in five transactions the previous year, to chalk up the highest annual volume by a distance for more than a decade.
Ratings analyst Scope said it expects the momentum to continue in 2026, driven by the "growing role of private credit in commercial real estate financing alongside sustained demand for securitisation as an alternative to bank lending".
It says the surge of new supply in 2025 reflected improved investor confidence, supported by stable collateral performance and a more favourable funding environment as interest rates began to normalise. In addition, Scope believes refinancing risk for existing securitised loans appears limited to the office sector. Nevertheless, it expects a quarter of all office loans, by number, will face high or very high refinancing risk.
New CMBS issuance was close to 75% higher than the previous three years combined, Scope says. That new financing "more than offset" the 17 loans prepaid or repaid in 2025 – six backed by industrial properties, six retail, two telecom exchanges, two residential and one office. The second largest volume this decade was in 2019, when just over €6 billion transacted as the market began to recover from the global financial recession, while in 2021 just under €6 billion transacted.
Pricing also became increasingly competitive, with weighted average note margins reaching recent lows of +1.72% and +1.79% in the UK and Europe, respectively, for the latest transactions.
But liability management remains an important factor, particularly for office loans. It says 43% of office loans have not repaid on their expected initial maturity dates.
According to CoStar News's reporting, the year's final CMBS issuance was Morgan Stanley and Deutsche Bank's December launch of DBMS 2025-1 DAC, a securitisation collateralised by an £828.8 million portfolio of mainly logistics assets in the UK that Blackstone bought via its takeover of Warehouse REIT. The transaction is characteristic as the sponsor is Blackstone, as it isin most transactions, the sector is industrial and the pricing is proving competitive. That said, the year saw a more diverse sponsor, lender and sector base. GoldenTree, Starwood Capital, Hines and Grupo Lar and Finance Ireland all getting in on the act.
The year's increase in CMBS activity in the UK and Europe fits in with a wider picture of an increasingly diverse and active financing market for commercial real estate in 2025, as seen in the latest Bayes UK lending report.
By mid October, CoStar found that year-to-date European CMBS issuance totalled €6.2 billion across 11 transactions, 68% of which were sponsored by Blackstone. In August, Blackstone completed and priced the UK's largest CMBS sale since the GFC, a £1.54 billion deal involving Haven holiday parks.
Looking at existing CMBS transactions, Scope points out that Taurus 2020-1 NL, a transaction backed by Dutch office properties, was recently modified and the loan extended by further three years with a potential additional one-year extension. Most loans have shown an improvement in one or both debt yield or loan-to-value compared with December 2024, it adds.
Sector-wise, industrial and logistics stabilised in 2025, with eight of the nine loans exhibiting an improvement in at least one of the two metrics. Scope points out for particular note the improvement of minus 7.6 percentage points of the Jupiter loan of Cassia 2022-1 SRL following the sale of two assets and an appraisal value that increased by 14% from a year earlier.
Office is showing signs of recovery, with five of the 14 loans showing improvements on both metrics, predominantly driven by property sales (HERA Financing 2024-1, Magritte CMBS NV/SA, Taurus 2021-2 SP), and scheduled amortisation (BERG Finance 2021, Canary Wharf Finance II plc).
However, revaluations continue to take their toll on LTV, particularly for the single asset transactions Scope highlighted a year ago: River Green Finance 2020 DAC (RGF 2020) and ELoC No. 33.
River Ouest, the property backing the RGF 2020 loan, leads the declines with a 55% decrease from the March 2022 valuation, resulting in a 67.5 percentage point LTV increase. CityPoint, the City of London office property backing the ELoC No. 33 loan, also exhibited a 40% market-value decline from the March 2023 valuation to £405 million, resulting in a 35 percentage point increase in LTV.
The Squaire property backing the senior loan of Taurus 2021-3 DEU has not been revalued since December 2024. However, given recent negative news regarding the departure of the main tenant, KPMG, Scope expects a reduction in the valuation and higher LTV.
The retail sector continues to show signs of resilience and growth, with all the loans improving on at least one metric since December 2024. Six transactions secured against loans backed by retail (notably shopping centres) repaid in full in 2025. The Meadowhall Financing, The Trafford Centre and Westfield Stratford City No.2 transactions, each of which refinances a specific super-regional shopping centre, saw their valuations increase which, together with scheduled amortisation for the first two transactions, helped to reduce the transactions’ overall leverage.
Weighted average note margins in CMBS are tightening from the higher levels of 2023, which were driven by sharp interest-rate increases and concerns in the commercial real estate sector. Recent deals in pounds and euros have priced at their tightest levels in four years, bringing the trailing 12-month WANM down to 2.04% and 1.93%, compared with 2.72% and 2.38% previously for pounds and euros transactions.
Despite the reduction in margins, Scope expects borrowers to continue exercising loan-extension options in 2026 to benefit from locking in advantageous financing conditions. As a result, the €5.4 billion refinancing needs of 2026 are expected to slightly decrease to €4.3 billion.
Refinancing will remain challenging for a quarter of the loans reaching their fully extended maturities: 25% by loan count face high to very high refinancing risks.
Commercial real estate will continue to stabilise in 2026, Scope says. Refinancing risk will remain higher for the office sector but improving financing conditions combined with good fundamentals and increased liquidity will improve access to capital for the other sectors.
"We expect capitalisation rates to remain stable as the commercial real estate risk premium is expected to increase while euro risk-free rates settle around 2.0% and sterling rates reduce to 3.5% by the end of 2026," it writes.
Scope's outlook is cautiously positive for industrial and logistics and multifamily; neutral for retail; and negative for office. Scope has a positive outlook for data centres, is cautiously positive on student housing, neutral on hospitality and cautiously negative on life sciences.