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.
Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces.
Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications.
Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).
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