Rising Sale-Lease Back Risk in CMBS

DBRS Morningstar has observed a growing volume of conduit commercial mortgage-backed securities (CMBS) loans secured by properties that are leased to non-investment-grade single tenants, which is expected to increase risk to bond investors amid a softening economy and higher interest rates. As loans secured by single-tenant properties continued their upward trajectory in early 2023, the health of loans backed by single-tenant properties across CMBS are a point of interest for many investors, as properties that rely on a lone tenant for all revenue generated are subject to greater concentration risks than multitenant properties.