Quarterly U.S. CRE CLO Report: Eyeing a Second Half Pickup in New Issuance After Stalled Q4 2022

Rising interest rates have pushed potential borrowers to the sidelines, as investors recalibrate return expectations and property values. Because of this, Q4 2022 commercial real estate collateralized loan obligation (CRE CLO) issuance stalled, with only three transactions totaling $2.9 billion. The fourth quarter rounded out a slow second half of the year with a total of seven deals, a stark contrast to the first half's 23 transactions. Total issuance in 2022 ended at $30.3 billion, the second-highest annual issuance on record, but it still represents a decline of nearly 33% from 2021.

DBRS Morningstar expects a minimal number of transactions in Q1 2023, with volume unlikely to surpass $3.0 billion. Issuance predictions for the entire year are murky at best, and most prognosticators see a slow first half of the year followed by a recovery in the second half of the year. DBRS Morningstar predicts CRE CLO issuance to decline in 2023 and end at just below $18.0 billion for the year. This would represent an approximate 40.0% and 60.0% decline from 2022 and 2021 issuance, respectively.