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CMBS Distress Increases Again in October
CMBS distress increased in October, according to two different measurements. The Trepp CMBS Delinquency rose 24 basis points in October to 4.63%, the highest reading since the end of the COVID-19 pandemic.
“However, one large industrial delinquency influenced the numbers considerably and blew up what was previously an incredibly low delinquency rate for that segment,” according to Trepp’s report. “A $930-million industrial loan showed up as past its balloon date and not current on interest payments. The loan originated in 2021 and backs a single-borrower CMBS deal.”
That being said, Trepp CMBS data for October showed increases in some property types and improvements in others. Lodging and retail delinquencies declined by 51 and 37 basis points, respectively, while multifamily and office delinquencies rose, with multifamily seeing a bigger increase than office.
The CRED iQ overall distress rate for CMBS increased by 14 basis points to 7.57% in October, the 10th consecutive monthly increase this year. However, two individual components of the overall distress rate–the core delinquency rate and the special servicing rate–declined slightly. The index for loans that are delinquent and/or in special servicing continued trending upward, though.
“A severely limited refinancing and a ‘higher for longer’ interest rate environment continues to contribute to sustained increases in commercial real estate distress,” CRED iQ reported. “With the Federal Reserve holding rates unchanged at the November meeting, perhaps the market is approaching the peak of interest rate increases, but that remains to be seen.”
- ◦Financing
