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Fitch: CMBS Defaults Leveled Off in 2021
U.S. CMBS loan defaults declined significantly in 2021 compared with 2020, as the resumption of economic activity supported a recovery in asset performance and property cash flows from their pandemic lows, Fitch Ratings reported in its US CMBS 2021 Loan Default Study. The total annual default rate for Fitch-rated CMBS transactions declined to 0.4% in 2021, down from 3.3% in 2020.
The cumulative default rate ticked down to 18.0% from 18.2%, due to a sharply lower 2021 term default rate of 0.3%, down from 2020’s 3.1%, and robust issuance volume. Maturity defaults rose to 0.17% from 0.13% with a higher volume of maturing loans in 2021 relative to 2020.
Retail loans accounted for the largest share of total defaults by balance in 2021 at 41.8%, down from 43.5% in 2020. Regional malls represented 61.3% of total retail defaults and six of the 10 largest overall defaults. Fitch expects maturing class B/C mall loans will comprise a larger share of retail defaults in 2022.
Hotel defaults reversed course in 2021, declining to 28.2% from 43.5% in 2020. The share of office defaults grew in 2021 to 17.6% from 7.8% in 2020, mainly due to term defaults of pre-pandemic underperformers concentrated in New York and Chicago.
Fitch said it expects the annual default rate to remain low and the cumulative rate to decline modestly in 2022. Maturity defaults will accelerate and represent a larger share of overall defaults, as early CMBS 2.0 transactions mature and interest rates rise.
- ◦Financing
