The CMBS market could be in for a turbulent year. A new report from Trepp estimates significant losses in the $540 billion of CMBS in the market—losses that will likely extend beyond the B-piece or junk bond class. Under a bearish scenario, up to 64% of the BBB bond market will incur losses.
In 2020, retail and hospitality product drove CMBS default activity. At the peak of delinquency numbers, 26% of hotel properties and 18.3% of retail properties were in special servicing. However, this year, multifamily and office properties are also showing increasing signs of risk for entering default, a trend that is fueling concerns, according to Trepp.
The good news? Lenders are providing flexibility and forbearance, albeit on a case-by-case basis. The bad news, according to Trepp: lenders are taking this opportunity to tie up borrowers and make any potential future default under the loan painful.
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Kelsi Maree Borland
