Editors’ Weekly News Roundup, May 8th – May 12th
Although it’s 72 degrees and sunny outside as this is written, possibly severe weather was in the forecast in three of the past week’s five most-read stories. The story that drew the most attention was news that the Federal Reserve has stepped up its scrutiny of loan performance in commercial real estate, which it sees as a risk to financial stability.
Fed Increases Monitoring of CRE Loan Performance derived from the Fed’s latest report assessing the resilience of the U.S. financial system. While CRE loans weren’t the only risk factor the Fed discussed, the May publication marked the first time that finance experts at the nation’s central bank gave the industry a section unto itself in the report.
In related news, Trepp reported that delinquencies for CMBS loans backed by office properties increased during the month of April. Connect CRE readers made Office CMBS Delinquencies Increase as Overall Rate Holds Steady the second most-read story of the past week.
Trepp noted that while the office sector’s CMBS delinquency rate is still lower than those of lodging or retail, delinquencies in those sectors have been declining while office has gone in the opposite direction. It’s worth noting, though, that CMBS delinquencies are nowhere near the peak we saw in the aftermath of the Great Recession.
That recession, you’ll recall, took the economy in general and CRE in particular a few years to shake off. By contrast, the downturn resulting from the pandemic was relatively brief if hard-hitting in its economic impact. Nonetheless, at least three of California’s largest cities continue to enforce pandemic-era tenant protection laws, and a story based on a Wall Street Journal report, Eviction Moratoria Still on the Books in Major California Cities, resonated with both California and national readers for the week’s third most-read story.
The week’s fourth best-read story also covered CRE finance, and in common with the week’s first and second most-read, the news wasn’t cheery. CRE Loan Originations Down 56% Year-Over-Year in Q1 reported data from the Mortgage Bankers Association (MBA), which followed up with a forecast that loan originations would be down 20% for the year.
As is often the case with our 150-word format, the story presented the most essential information while not delving into the more granular details. It’s worth mentioning that while most classes of lenders saw year-over-year declines in volume, one group saw an increase: companies that MBA describes as “investor-driven lenders.” Their volume declined on a quarterly basis, though, albeit by a lower percentage than that of insurance companies or banks.
There was some sector-specific good news in the past week’s top five, and that sector was self-storage. Based on 2022 investment volume as analyzed by Yardi, we reported that Sales Market Remains Strong for U.S. Self-Storage.
New York City dominated the sales market in 2021, largely on the strength of a $3-billion entity-level acquisition, and did so again last year, according to Yardi. That’s in keeping with a trend of sales being strongest in underserved markets, and when it comes to self-storage space, cities don’t come more underserved than New York, where the per capita square footage of storage is about one-third the national average.
That scarcity of storage space represents an opportunity for sellers. For a look at another silver lining in negative circumstances, consider the opportunities accorded to expansion-minded retailers by the closure of the Bed Bath & Beyond chain. Amy Sorter has an analysis of the retailers who could fill those vacant storefronts in the latest Weekender.