Commentary

A Credit Perspective on Mass Timber, As Its Use in U.S. Construction Projects Builds

CMBS

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Summary

In this commentary, we take a preliminary look at the potential CMBS credit ratings implications for mass timber buildings, which are growing in popularity in North America as an alternative construction material to steel and concrete. In the U.S., the total stock of mass timber buildings is projected to double every two years through 2034. This growing demand is a result of several benefits these materials offer, from traditional bottom-line advantages and positive environmental sustainability implications to pleasant aesthetics that can help attract workers back into the office.
Key highlights include:

-- An explanation of what mass timber is and how its use has grown.
-- A look at the cost implications for mass timber buildings.
-- General decarbonization, resiliency, and sustainability factors.
-- ESG Considerations.
-- An appendix laying out the different types of mass timber construction types.

“Morningstar DBRS views the credit implications for mass timber buildings as emerging. Although in some instances these types of buildings have outperformed their market competitors, we have not positively adjusted credit ratings inputs because performance information has been limited,” said Kevin Augustyn Senior Vice President, Global Structured Finance Ratings, Credit Practices. “If additional data become available regarding rents, occupancy, and absorption performance levels for mass timber buildings, we may publish a follow-up to this commentary.”

Note: On January 26, 2024, we revised this commentary to update a few technical data points and revised the exhibits to reflect more recent mass timber project volume information.

Available Documents