Research - APRIL 4, 2017

CMBS delinquency rate rises 6 bps in March

by Jody Barhanovich

The U.S. CMBS delinquency rate, which has been moving steadily higher during 11 of the past 13 months, continued its climb in March, according to Trepp. The delinquency rate for U.S. commercial real estate loans in CMBS is now 5.37 percent, an increase of 6 basis points from February.

The rate is now 115 basis points higher than the year-ago level, and 14 basis points higher year-to-date. 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.

Rising delinquency rates for the industrial, retail and lodging property types helped push the rate higher in March, with industrial loan delinquencies rising 109 basis points to 7.03 percent, retail loan delinquencies rising 19 basis points to 6.12 percent and lodging loan delinquencies rising 27 basis points to 3.7 percent. The CMBS delinquency readings for office and multifamily loans fell month-over-month, however, with office loan delinquencies down 27 basis points to 7.38 percent and multifamily loan delinquencies down 22 basis points to 2.6 percent.

In March, almost $2 billion in loans became newly delinquent, which put 46 basis points of upward pressure on the CMBS delinquency rate. More than $500 million in loans were cured in the past month, which helped push delinquencies lower by 12 basis points.

About $1.1 billion in CMBS loans that were previously delinquent paid off with a loss or at par last month, which also helped mitigate the jump in new delinquencies. Removing those previously distressed assets from the numerator of the delinquency calculation moved the rate down by 26 basis points.

Late in 2016, Trepp noted, “It is hard to see the rate going down anytime in the near future.” Trepp still believes that trend will continue until the summer as the “wall of maturities’ plays out; however, the rate should begin to level off or retreat later in 2017.

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