CMBS Delinquency Rate Dips; Special Servicing Rate Increases

(Courtesy Trepp, New York.)

Fitch Ratings, New York, reported the commercial mortgage-backed securities delinquency rate decreased two basis points in February to 1.83%.

“Continued resolution volume dispersed across property types outpaced a lower volume of new delinquencies that was mostly office and retail,” Fitch said in its February CMBS Delinquency report.

Fitch said new 60-plus-day delinquency volume dipped to $469 million in February, roughly half of January’s $947 million volume. More than 90% of new delinquencies were in the office (56%, $262 million) and retail (35%, $167 million) sectors.

Last week Bloomberg reported some wealthy commercial property owners have defaulted on some office property loans.

Maturity defaults represented 38% of new delinquencies ($177 million), 75% of which were office loans, Fitch said.

CMBS resolution volume declined to $607 million in February from $775 million in January, dispersed across retail (28%, $170 million), office (25%, $154 million) and hotel (21%, $126 million) loans, Fitch reported. February resolutions included $320 million of loans brought current, $239 million of liquidations and $47 million of loans that had been 60-plus days delinquent that moved to 30 days delinquent.

Looking at CMBS loans in special servicing, Trepp Research Associate Jack LaForge said the rate rose seven basis points in February to 5.18%–higher than at year-end 2022. Six months ago, the rate equaled 4.92% and 12 months ago, the rate was 6.08%.

“The February rate increase marks the fifth rise in the last seven months,” LaForge said, noting three of the five major property types–multifamily, office and industrial–saw increases in the special servicing rate February.

“For the third month in a row, the office sector led the way for all new special servicing transfers,” LaForge said. Nearly 44% of all new CMBS special servicing transfers were loans backed by office properties.

Overall, new transfers to special servicing jumped to $1.84 billion last month from $686 million in January, Trepp reported.