CMBS Delinquency Rate Dips

The commercial mortgage-backed securities delinquency rate dipped in November, largely due to continued Coronavirus debt relief, said Fitch Ratings, New York.

Fitch said the overall U.S. CMBS delinquency rate fell 12 basis points to 4.73 percent due to more loans receiving Coronavirus debt relief and a slowdown in the volume of new delinquencies.

November resolutions totaled $2.0 billion, with 35 percent granted relief, mostly retail ($260 million) and hotel ($236 million) loans. New delinquencies totaled $1.5 billion, well below the $2.5 billion monthly average over the prior three months Fitch said.

Kroll Bond Rating Agency, New York, said the hotel sector continued to record the highest delinquency and specially serviced rate among all property types, followed by retail and mixed-use properties.

On a recent TreppWire Podcast, Trepp Senior Managing Director Manus Clancy and Head of CRE Finance Joe McBride forecast how CMBS delinquency rates might evolve over the next six months.

McBride noted the Trepp retail delinquency rate in November exceeded 14 percent. He said he expects this rate to be cut nearly in half by next July assuming a federal stimulus and a vaccine are in place. Clancy said he holds a much more negative view of the retail sector’s stability and said its delinquency figure could rise to 16.5 percent by next summer.

November’s office loan delinquency rate equaled 2.27 percent, down 22 basis points from October. Both Clancy and McBride said they believe this rate will rise through next year, largely due to the work-from-home trend.

The industrial sector has been more resilient than other sectors. “While most CRE sectors were adversely impacted by the COVID downturn, the industrial sector continuously reported low delinquency, special servicing and watchlist rates,” Trepp said. Clancy said the industrial delinquency rate will remain at its current 1.10 percent through summer 2021. McBride said the rate could approach 1.53 percent by next July.

The multifamily market has weathered the short-term effects of the pandemic, McBride and Clancy noted. The sector’s delinquency rate equaled 3.11 percent in November. McBride said this rate could dip to 3.10 percent by July while Clancy said it could rise to 3.30 percent.

The lodging sector suffered the most severe fallout of COVID-19 shutdown protocols. Its delinquency rate spiked in May and has remained above 19 percent as forbearances reached record highs and the special servicing rates jumped. November data show the lodging delinquency rate came is just under 20 percent. McBride said this figure could fall to 6.80 percent by July; Clancy is less optimistic saying the rate could fall to 15.00 percent by then.