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CMBS delinquency rate falls sharply, down 32 bps in February
Research - MARCH 2, 2018

CMBS delinquency rate falls sharply, down 32 bps in February

by Jody Barhanovich

The Trepp CMBS Delinquency Rate fell sharply in February, as the rate has now dropped in eight straight months. The delinquency rate for U.S. commercial real estate loans in CMBS is now 4.51 percent, a decrease of 32 basis points from the January level. It is now possible that the rate could break the post-crisis low from February 2016 over the next few months, predicts Trepp.

The February 2018 rate is 80 basis points lower than the year-ago level. The reading hit a multi-year low of 4.15 percent in February 2016, and the all-time high was 10.34 percent in July 2012. The rate is lower by 38 basis points year-to date.

Almost $600 million in loans became newly delinquent in February, which put 13 basis points of upward pressure on the delinquency rate. More than $800 million in notes were cured last month, which reduced the delinquency rate by 20 basis points. In addition, more than $700 million in previously delinquent CMBS debt was resolved with a loss or at par in February. Those resolutions shaved 17 basis points off the February reading.

The delinquency rate has now decreased each month since June 2017. As the rate gradually slid downward, Trepp predicted future declines were likely as the Wall of Maturities period was coming to a close. Trepp believes further reductions are likely in store for the next few months.

The delinquency rate moved up in 13 of the 16 months between March 2016 and June 2017. The delinquency level has receded consistently since June as most of the bubble-year loans from 2006 and 2007 passed their maturity date and were resolved (albeit, sometimes with losses). Since June 2017, the Trepp CMBS Delinquency Rate has fallen by 124 basis points.

Breaking it down by property type, the industrial delinquency rate fell 6 basis points to 5.54 percent, while hotel loans plunged 128 basis points to 3.23 percent. The office delinquency rate decreased by 38 basis points to 5.46 percent, and the retail delinquency rate dropped 14 basis points to 6.16 percent. The multifamily delinquency reading moved up 32 basis points to 2.40 percent, which remain the best-performing major property type.​

 

 

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