The European commercial mortgage-backed securitisation (CMBS) market has experienced a remarkable resurgence in 2025, marking its strongest start in decades and revitalising a critical avenue for real estate financing. After years of subdued activity, the market witnessed €3.3 billion (£2.9 billion) issued and securitised in the first quarter across six transactions, representing the highest quarterly figure since the global financial crisis. This momentum carried forward into mid-year, with issuance reaching €4.7 billion from ten deals—already surpassing the totals for both 2022 and 2023 combined. The revival underscores growing investor confidence and highlights a significant shift towards debt-financed real estate investments in Europe, mirroring the vigorous recovery seen in the U.S. CMBS market.

Historically volatile in Europe, the CMBS sector had been cautious, often retreating amid market instability, but 2025 is proving different. Mirco Iacobucci, Head of European CMBS at Morningstar DBRS, noted that recent conditions suggest a more robust and functional market, supported by attractive pricing. AAA-rated CMBS tranches have been offered at spreads around 25 basis points lower than earlier in the year, making them more competitive than traditional bilateral loans despite the structural complexity and associated fees. This has particularly benefited large transactions, although there is potential for smaller loan securitisations to enter the market, following patterns established in the U.S. where CMBS are more prevalent across a broader loan spectrum.

Industrial and logistics properties continue to dominate the portfolio of CMBS transactions, with major private equity firms playing a leading role. Blackstone, in particular, has been central to many landmark deals, including the UK’s largest CMBS sale since the global financial crisis—a £1.5 billion transaction secured on a portfolio of 39 holiday parks under its Haven platform. This deal exemplifies how CMBS structures are expanding into niche sectors such as holiday parks and data centres, which are generating substantial, stable cash flows attractive to bond investors. Blackstone’s head of Real Estate Europe Capital Markets, Gadi Jay, highlighted that CMBS’s ability to create multiple tranches catering to different risk appetites enhances liquidity and financing flexibility, differentiating it from traditional loan arrangements.

Other notable recent issuances include Blackstone's €525 million Sequoia Logistics 2025-1 DAC, the largest euro-denominated CMBS since 2021, backed by urban logistics assets across prime last-mile locations in Europe. Additionally, Bank of America launched its third European CMBS in 2025, a €260 million Taurus 2025-1 EU DAC secured by 37 logistics properties owned by Carlyle Group, featuring near-full occupancy and tenant stability. These transactions illustrate the continuing investor appetite for logistics real estate, a sector that underpins much of the CMBS market’s revival, alongside growing interest in other asset classes.

Despite the positive trends, refinancing risks remain a pertinent challenge within European CMBS structures. Scope Ratings recently highlighted that about one-third of loans maturing in 2023 and 2024 face high or very high refinance risk, driven by the tightening credit environment and rising debt costs. This includes a significant portion exposed to increasing interest rates, which may impact borrower capacity to meet debt service requirements. It reflects broader pressures in the commercial real estate finance market, reinforcing the need for prudent underwriting and risk mitigation within securitised deals.

On a regulatory level, the European Commission is actively seeking to ease securitisation rules to encourage further growth in this market. By simplifying due diligence, streamlining reporting requirements, and reducing redundant investor checks—particularly for private deals—the reforms aim to boost bank lending while maintaining financial stability. Maria Albuquerque, EU Financial Services Commissioner, emphasised that the intention is to restore balanced risk-taking that can invigorate economic activity while preserving investor protection. Such regulatory adjustments are expected to facilitate greater capital market integration and expand financing options for European real estate borrowers.

The expanding CMBS market in Europe is also marked by increasing diversity in sponsors and asset classes, as highlighted by industry observers. Brookland’s founder Nassar Hussain described the Haven holiday park deal as a potential catalyst for attracting new issuers and broader asset types to securitisation, thereby increasing market depth and liquidity. This trend coincides with private equity’s predominant role in driving large portfolio securitisations, although the market's maturation and structural innovations promise to attract new investor segments, including U.S. capital seeking value in Europe.

Overall, the revived European CMBS market presents an important alternative source of real estate financing, potentially alleviating some pressure arising from banks’ retrenching exposure to commercial real estate. While traditional bank lending remains robust, shifting lending patterns and competitive pricing suggest CMBS could become a more prominent cornerstone of Europe’s real estate debt ecosystem, supporting growth across various property sectors and transaction sizes.

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Source: Noah Wire Services