A lot of discussion these days in the commercial mortgage–backed securities world centers around cycles because CMBS, which on a very general level operates on a 10-year cycle, appears to be at a peak. That means the downside swing should be coming soon — or has it arrived already?

“The commercial real estate cycle is long in the tooth and [net operating income] growth has been slowing across the property types in commercial real estate,” observes Ryan Biernesser, sector-specialist CMBS at Semper Capital Management. “If there is limited NOI growth and cap rates start to rise, you will start to see a slowing in property appreciation or even a decrease in commercial property values. We are definitely in the later innings of the cycle.”

What a difference a decade makes

The current 10-year CMBS cycle was preceded by a U.S. economic crash that was partly the result of loose lending standards during the real estate boom that ended in 2007,