CMBS delinquency rate drops 3 bps in November
The Trepp CMBS Delinquency Rate fell modestly in November, marking the fifth straight month in which the reading has dropped. The delinquency rate for U.S. commercial real estate loans in CMBS is now 5.18 percent, a decrease of 3 basis points from the October level.
The November 2017 rate is only 15 basis points higher than the year-ago level and 5 basis points lower than the level measured at the start of 2017. 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.
After hitting a post-crisis low in February 2016, the reading climbed steadily for more than a year as loans from the years of 2006 and 2007 reached their maturity dates and were not paid off. The delinquency rate moved up 13 times in the 16 months between March 2016 and June 2017. However, the delinquency level has receded since June as bubble-year loans have passed their maturity date and been resolved.
Now that delinquencies have fallen in each of the last five months, Trepp says that the CMBS rate is on a trend downward for the following months. As fewer 2006 and 2007 loans reach their balloon dates and more distressed loans are resolved, the delinquency rate should continue to trend even lower.
About $1.1 billion in loans became newly delinquent in November, which put 27 basis points of upward pressure on the delinquency rate. A little more than $300 million in loans were cured last month, which reduced the delinquency rate by 8 basis points. About $900 million in previously delinquent CMBS loans were resolved with a loss or at par in November. Those resolutions shaved 22 basis points off the November reading.
Breaking it down by property type, the industrial rate fell 14 basis points to 6.10 percent, while hotel loans increased 21 basis points to 3.63 percent. The office delinquency rate decreased by 42 basis points to 6.50 percent and the retail rate moved up 32 basis points to 6.79 percent. The multifamily delinquency rate dropped 27 basis points to 2.71 percent and remains the best performing major property type.
