Sundown? Volume of CMBS Delinquency Increased 49.4% During 10 Months Through October (Office Sector Delinquency Rate UP 261% Over 10 Months) – Confounded Interest – Anthony B. Sanders

Is it sundown for the US commercial real estate market?

According to Trepp, the volume of CMBS delinquency increased 49.4% during 10 months through October.

Looking for more? This piece has been taken from Trepp and Commercial Real Estate Direct’s Q3 2023 Quarterly Data Review. Access the magazine here.

The volume of CMBS loans that are classified as delinquent increased by 49.4% during the 10 months through October to $27.91 billion. That volume amounts to 5.07% of the $601.98 billion universe tracked by Trepp. In contrast, delinquencies at the end of last year amounted to 3.03% of the $616.15 billion universe then extant.

Office Sector Drives Increase in Delinquency Volumes

The driver of the increase was the office sector, which had a 261% increase in delinquency volumes over the 10-month period through October. A total of 199 loans with a balance of $9.59 billion, or 5.91% of all CMBS office loans were at least 30 days late with their payments, as of the end of October. At the end of last year, 115 loans with a balance of $2.65 billion, or 1.63% of office loans, were delinquent. 

The sector’s prospects are unlikely to improve as office occupancy rates have declined in most of the country’s major markets. That’s been driven by a substantial pullback in demand from office-using tenants.

Hit especially hard have been loans with floating coupons that are maturing and need interest-rate cap agreements in place before they qualify for term extensions. Those rate caps have skyrocketed in price in lockstep with interest rates.

On the residential side, The Fed is helping drive mortgage payments through the roof!

I wonder if Fed Chair Jerome Powell likes it like that!