Delinquencies Improving

by | 11 March 2021

  • CMBS delinquencies improved for the eighth straight month, per data from Trepp.
  • Industrial (0.9%), office (2%), and multifamily (2.3%) have the lowest delinquency rates.
  • Hotel delinquencies remain the highest, at 16.4%; retail second, at 11.8%.
  • Overall delinquencies peaked at 10.3%, matching the previous peak set in July 2012.
  • The MBA notes that 5.2% of commercial and multifamily loan balances were not current in February, the best reading since April 2020.
  • Special servicers will remain busy for the foreseeable future, but it is possible that the worst is now behind us.

Trepp’s latest data release showed continued improvement in CMBS delinquencies, with all asset classes improving or holding steady. After a rapid rise following the outset of the pandemic in April, May and June, overall rates have trended down. The overall delinquency rate ended in February at 6.8%, a 4.8-percentage-point increase from a year ago. However, delinquencies peaked at 10.3% in June, in line with the peak of July 2012. This has been a much faster cycle, as the peak was reached within months of the pandemic’s onset as opposed to years after the start of the Great Financial Crisis.

The MBA, which surveys loan holders representing about half of the outstanding commercial and multifamily mortgage debt, noted continuing improvement of overall current loan balances. With a wider sample set than just CMBS, their data further supports an improvement in delinquencies across asset types.

Per CMBS data, Hotel and retail have the highest delinquency rates, 16.4% and 11.8%, respectively. Hotel delinquencies peaked at 24.3%, so they’ve greatly improved. Retail, with the highest delinquency rate prior to the pandemic, has steadily improved from 18.1% in June.

Real Capital Analytics reported tens of billions of dollars’ worth of troubled or potentially troubled loans in hotel and retail. While the recovery in delinquency and slight improvement of loans in special servicing suggest that the worst may be behind us, 24.2% of hotel loans and 16.7% of retail loans are with a special servicer as of February. This shows that we aren’t out of the woods yet and that many properties will have a long climb back.