US CMBS Delinquency Rate Posts Biggest Increase in Two Years

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The Trepp CMBS delinquency rate moved up 11 basis points in October, which is the highest rate increase in the past two years.

Percentage of Loans 30+ Days Delinquent

The slower resolution of distressed loans, paired with a slight uptick in new delinquencies and more healthy loans paying off, have combined to slow the ever downward march of the delinquency rate.

Trepp, LLC, the leading provider of information, analytics, and technology to the CMBS, commercial real estate, and banking markets, released its October 2014 US CMBS Delinquency Report today (available at http://www.trepp.com/knowledge/research).

The Trepp CMBS delinquency rate moved up 11 basis points in October, which is the highest rate increase in the past two years. The last time the delinquency rate posted a larger gain was in July 2012, when the delinquency rate rose by 18 basis points. The delinquency rate for US commercial real estate loans in CMBS is now 6.14%.

While the trend in delinquencies has become less consistent, October’s reading measures 184 basis points lower than the year-ago level. In addition, the total amount of delinquent loans remained flat month-over-month, at $38.1 billion, despite an uptick in new delinquencies.

“Considering the aggressive rate at which special servicers have been burning off loans in distress over the last two years, it was inevitable that the delinquency rate would start to level off,” said Senior Managing Director Manus Clancy. “We expect more muted gains over the next few months than we grew accustomed to in 2013 and early 2014.”

With the exception of the office delinquency rate, all readings by major property type worsened. The multifamily delinquency rate increased 81 basis points in October to 9.80%, securing its position as the worst performing property type. Lodging loans saw the second greatest month-over-month increase, at 29 basis points, but remains the best performing property type, with a rate of 5.35%.

According to Research Analyst Joe McBride, the liquidation of distressed CMBS loans has slowed down markedly over the past half-year. “The average volume of loans liquidated with losses over the past six months is $1.05 billion per month, which is significantly lower than the $1.54 billion average six months prior. The slower resolution of distressed loans, paired with a slight uptick in new delinquencies and more healthy loans paying off, have combined to slow the ever downward march of the delinquency rate.“

For additional details, such as delinquency status and historical comparisons, request the October 2014 US CMBS Delinquency report at http://www.trepp.com/knowledge/research. For daily CMBS commentary, follow @TreppWire on Twitter.

About Trepp
Trepp, LLC, founded in 1979, is the leading provider of information, analytics and technology to the CMBS, commercial real estate and banking markets. Trepp provides primary and secondary market participants with the web-based tools and insight they need to increase their operational efficiencies, information transparency and investment performance. Trepp serves its clients with products and services to support trading, research, risk management, surveillance and portfolio management. Trepp is wholly-owned by DMG Information, a division of the Daily Mail and General Trust (DMGT).

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Joe McBride
Trepp
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