In a statement, Thomas Abruzzo, managing director and co-head of Fitch's North America financial institutions group, comments that "the potential for further deteriorations in commercial real estate portfolios is a major contributor to Fitch's negative outlook for the banking sector. Loan losses are increasingly likely given the expectation for ongoing declines in commercial real estate markets."

It was just such deteriorating conditions that resulted in another monthly increase in US CMBS delinquencies last month. CMBS loan delinquencies now stand at 3.86%, although with two months to go in 2009 the delinquency rate could finish out the year at well short of the 6% rate Fitch and other agencies had predicted last spring.

On a percentage basis, the office sector had the biggest monthly increase, rising 19.4% and $557 million to a 2.29% delinquency rate. "With the looming possibility of leases expiring on space under-utilized by companies that have downsized, office performance may not reach a trough for a few years," says Susan Merrick, head of Fitch's US CMBS group, in a release. In second place was the hospitality sector with a 16.5% increase worth $493.9 million of new delinquencies, although the delinquency rate for hotels is the highest at 6.81%. Multifamily has the second-highest late-pay rate at 6%.

However, although retail comes in third behind hotels and multifamily, the sector has the biggest dollar volume of delinquent loans at $4.9 billion. Retail loans showed only a slight increase from the $3.9 billion recorded in September, according to Fitch; the delinquency rate for this sector is. Loans backed by industrial properties ended October with $746 million of delinquencies, a 3.8% month-over-month increase. The delinquency rate for industrial is 3.09%.

October's 21-bps increase in commercial real estate loan CDO late-pays brought the delinquency rate for CDOs above 10% for the first time. Non-traditional property types—including loans secured by interests in land, condominium conversions and construction projects—now represent 44% of all delinquencies, a disproportionate amount considering that these property types comprise only 13% of the collateral in Fitch-rated CREL CDOs.

According to Fitch, approximately 40% of all land loans in the Fitch-rated CREL CDO universe are now delinquent, and increased delinquencies are expected. The agency says other non-traditional asset types also have high overall delinquency rates, with condominium conversions at 23% and construction loans at 29%.