Trepp Research: COVID-19 Initiates Surge in Late Payments in the Retail Market

Share Article

Given the uncertainty surrounding the retail real estate market and the inevitable financial distress which has yet to occur, Trepp has analyzed the state of retail, its historical performance relative to other property sectors, and key players that will likely be hit the hardest by the outbreak.

Over the last several years, the retail sector has been challenged, largely attributed to the closings of major shopping malls, clothing outlets, and merchandise retail stores, as consumers continue to move toward online alternatives for their shopping needs.

Trepp, a leading provider of information, analytics, and technology to the structured finance, commercial real estate, and banking markets, has released a research report on the retail commercial real estate sector amidst the coronavirus pandemic. The full report can be accessed here: https://info.trepp.com/covid-19-retail-report-april-2020-pr.

The outbreak of the novel coronavirus has led to a total retail shutdown across the country, with retailers forced to close to maintain social distancing guidelines. A month after these closings, the financial impact in the CMBS market has taken form as retailers have stopped rent payments during the coronavirus shutdown.

According to Trepp data, retail loans account for over 25% of the outstanding mortgage debt in the CMBS universe – the second-largest property type by outstanding balance (the largest being office loans, which represent 27% of the pie).

“Over the last few years, the retail sector has been challenged, mainly due to the closings of major shopping malls, outlets, and merchandisers, as consumers continue to move toward online alternatives for shopping needs," said Kelvin Lin, Trepp research analyst. “The current marketplace is adding to that stress.”

In Trepp’s March Delinquency Report, retail logged the worst performance of all major property types, with a delinquency rate of 3.89% (overall rate was 2.07%). This was twice the delinquency rate of the next worst-performing sector, office. April’s numbers indicate that the retail delinquency rate is now at 3.83% so far, and with several large retailers indicating that they will not be making rent payments, the rate will likely continue to increase in the coming months.

Although metro statistical areas have not seen a significant rise in retail delinquency rates, the number of newly watchlisted properties spiked up over the last month on a large scale. A substantial total of 345 retail loans with a balance of $6.6 billion were placed on the watchlist this month based on available remittance data which is a significant uptick from February’s count of 38 loans with a balance of $432 million, prior to the crisis.

For additional details, such as retail delinquency rates by state, the largest MSAs by retail balance, the number of retail loans in grace period or beyond, newly watchlisted retail loans by state, and CMBS balances broken out by bankrupt or distressed large retailers, download Trepp’s COVID-19 Retail Report: https://info.trepp.com/covid-19-retail-report-april-2020-pr. For daily CMBS and CRE commentary, follow @TreppWire on Twitter.

About Trepp
Trepp, founded in 1979, is the leading provider of information, analytics, and technology to the structured finance, 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. From its offices in New York, San Francisco, and London, Trepp serves its clients with products and services to support trading, research, risk management, surveillance, and portfolio management. Trepp is wholly-owned by Daily Mail and General Trust (DMGT). For more information, visit https://www.Trepp.com.

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Kelvin Lin
Trepp
2127541010
Email >
@TreppWire
Follow >
Visit website