Steven Marks, managing director with Fitch Ratings, spoke with REIT.com for a video interview at REITWorld 2012: NAREIT’s Annual Convention for All Things REIT at the Manchester Grand Hyatt in San Diego.
Fitch Ratings is a global rating agency headquartered in New York and London. The firm has 50 offices worldwide.
As development ramps up in the multifamily sector, Marks pointed to other sectors where he anticipates development in the coming year.
"The one place where there has been a pickup in development, other than multifamily, has been industrial," according to Marks. "However, a lot of that industrial development has been more build to suits as opposed to spec. In addition CBD office has seen some development."
However, he is quick to point out that there is little development in the remaining sectors and added that both retail and health care development is down.
In terms of credit quality, Marks said when analyzing REITs today he looks at macro issues including how the fiscal cliff is creating uncertainty and leaving many companies choosing or not choosing to not make decisions this year or into early next year.
"The second thing more broadly is the economy. The economy ultimately drives demand for commercial real estate and if the economy continues to bump along slowly then probably commercial real estate will bump along slowly as well," he said, adding that some of the micro issues the firm looks at includes liquidity, access to capital and quality of assets.
When it comes to lending Marks said "bifurcation is back." He said it started in late 2008 and early 2009 when the credits markets slowed down.
"If you're a fan of efficient markets you probably want there to be some bifurcation and some selectivity and discrimination on the part of lenders to really lend to good assets," he said, adding that lenders had not been as selective as they could be in the past.
Going forward he predicts that CMBS in the REIT market is going to grow. However, Marks said it’s conditional on how the risk retention rules affect the banks.