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CMBS Office, Retail Rate of Loan Defaults Rise
The rate of office and retail CMBS loan defaults rose in July, according to the latest research by Trepp. The six-month moving average of probability of default (PD) rates are at all-time highs for office and retail in 2017, with the industrial average almost above its mid-2010 high.
Trepp’s study looked at the number of new defaults in every period as a percentage of the total, which considers loan count, not balance. Higher recent rates mean that on a monthly basis, a larger share of outstanding loans is entering default than during the depths of the recession.
That’s not too surprising, since 2017 has experienced record loan maturity volume and when taking into consideration the denominator effect, notes Trepp. That is offset, to some degree, by the fact that defaults are only counted once when they first occur. Underlying default rate trends help investors see trends develop.
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