CMBS delinquency rate continues to drop, down 6 bps in January

The Trepp CMBS Delinquency Rate dropped again in January, as the rate has now fallen in seven straight months. The delinquency rate for U.S. commercial real estate loans in CMBS is now 4.83 percent, a decrease of 6 basis points from the December level.

The January 2018 rate is 35 basis points lower than the year-ago level. The reading hit a multi-year low of 4.15 percent in February 2016. The all-time high was 10.34 percent in July 2012.

The delinquency rate moved up in 13 of the 16 months between March 2016 and June 2017. However, the delinquency level has receded consistently since June as most of the bubble-year loans from 2006 and 2007 have passed their maturity dates and have been resolved. In other words, fewer loans from the bubble years are defaulting and those that did default are being resolved away (often with losses) at a decent clip. Since June 2017, the Trepp CMBS Delinquency Rate has fallen by 92 basis points.

Almost $1.35 billion in loans became newly delinquent in January, which put 32 basis points of upward pressure on the delinquency rate. About $290 million in loans were cured last month, which reduced the delinquency rate by 7 basis points. Nearly $800 million in previously delinquent CMBS loans were resolved with a loss or at par in January. Those resolutions shaved 19 basis points off the January reading.

Breaking it down by property types, the industrial delinquency rate fell 7 basis points to 5.60 percent, while hotel loans climbed 69 basis points to 4.51 percent. The office delinquency rate decreased by 56 basis points to 5.84 percent and the retail delinquency rate increased 17 basis points to 6.30 percent. Apartment loans remain the best-performing major property type, with the multifamily delinquency reading dropping 28 basis points to 2.08 percent.

Trepp predicts further rate declines could be in the cards in the coming months.