The State of CRE Servicing Today
(From left: Jamie Woodwell, Brett Adams, Frankie Jones, Jr., CCMS, Katie Schwarting, Chris Shamaly)
SAN DIEGO–The commercial real estate servicing market is bending but not breaking, panelists said here at MBA’S CRE Servicing Solutions Conference.
Chris Shamaly, Executive Managing Director, CBRE Loan Services, Inc., noted the cost of capital hasn’t done what borrowers thought it was going to do. “The whole ‘higher for longer’ situation is still at hand, and compound that with the fact that we’ve got a historic maturity in front of us,” he said. “In 2026, commercial real estate maturities are going to be about $930 billion. A lot of that was 2024-2025 extensions.”
Shamaly said the industrial and multifamily sectors are doing pretty well. “Office, on the other hand, like, say in the CMBS world, delinquencies are at something like 12%, an all-time high, so we’ve got two worlds going on at the same time.”
Frankie Jones, Jr., CCMS, Vice President & Managing Director, Lincoln Financial Group, noted that as the office market has slowed, there are more opportunities and new money for alternative property types that are increasingly becoming more institutionalized. “One example would be manufactured housing,” he said. “I would also include student housing in that mix, as well as storage. I think that those three property types are ones that we’ve seen greater focus on. Part of the reason for that is that, unlike the main property types, they did not experience the same capital compression, so there wasn’t as much valuation loss with those–even in terms of existing product. You’re also seeing healthy yields across the new construction. So, I think that there’s going to be some continued shift into those property types.”
Brett Adams, Senior Managing Director and Chief Servicing Officer with Berkadia, discussed the multifamily sector. “I think one of my favorite terms recently is that the math isn’t mathing,” he said. “If you look at the rent growth–or lack thereof–in the multifamily space, especially, it has been pretty flat, and it is just making the increased expenses show even more. It is a struggle to get their refinances. Everything is just a slog.”
Adams noted rising interest rates are affecting servicing both during the loan term and at maturity. “We’re seeing both,” he said. “It’s affecting the day-to-day operations. The expenses are a lot higher, and the rent growth is not there. So, the day-to-day operations suffer from more deferred maintenance and more inspection issues.”
