The ducks are lining up nicely for the commercial mortgage sector this year, as a number of factors converge that are strong positives for this asset class. Higher interest and mortgage rates will limit production, thereby increasing demand for current deals, but it will be the prospect of better economic times that will prove to be the biggest factor for CMBS.

Already, the current economic environment is affecting predictions for 2002 supply. As the market emerges from a banner year in terms of issuance volume, CMBS market participants are expecting the numbers to go down in 2002. A higher interest-rate environment - dampening the demand for credit - combined with the worsening performance of CMBS sectors such as retail and selected office markets, may inhibit this year's performance.

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