Retail CMBS Distress Continues to Improve

The Trepp CMBS Delinquency rate dipped slightly in March, led by a significant improvement in the retail CMBS delinquency rate and, interestingly, a 5 basis point uptick in the office delinquency rate. The overall delinquency rate declined 4 basis points to 4.67%, with the retail delinquency rate posting a 47-basis point drop to 5.56%.

“This comes even as the outstanding balance of retail loans has remained relatively flat, indicating resilience in issuance amid softening performance,” wrote Trepp’s Thomas Taylor.

The office delinquency rate declined to 6.58%.

Retail remains the second-worst performing asset by delinquency and special servicing rate, outpaced only by office in both categories, while the sector boasts the lowest watchlist rate, Taylor noted. However, “retail’s distress metrics continue to improve monthly,” he wrote.

Trepp reported that 19.6% of retail loans were on watchlists last month, a 22 basis point increase month over month. That compares with 24.9% of all loans on the watchlists, a 199 basis point increase from the previous month.

Loans tied to regional malls tend to be the ones in delinquency and special servicing, while those backed by superregional, neighborhood and community shopping centers are doing well.