Office CMBS Delinquency Rate Tops 8% For First Time Since November 2013

The delinquency rate for commercial mortgage-backed securities (CMBS) has seen “significant credit changes” in newly delinquent, cured, and modified loans, according to Trepp.

Between June and July, CMBS office delinquency went from 7.55% to 8.09%. That means office crossed the 8% delinquency rate line for the first time since November 2013, when the rate was 8.58%. Multifamily delinquency went from 2.36% in June to 2.63% in July.

However, retail CMBS delinquencies went from 6.42% in June to 6.14% in July, a drop of 28 basis points. Similarly, lodging delinquencies dropped 15 basis points, from 6.32% in June to 6.17% in July.

This compares to a Trepp report about special servicing rates earlier this month. This year, special servicing started at 6.95% and has grown every month, meaning an additional 135 basis points since January 1, 2024, and 168 year-over-year. The rate was at a three-year high and is currently 350 basis points above the July 2022 level. The seven-basis movement was small – but the cumulative shift is significant.

Like delinquency rates, the special servicing rates varied by property type. Office July 2024 special servicing rate was 11.25%, up from 7.33% a year ago. The next highest was retail at 10.89%, only two basis points above the 10.87% rate the prior year. Multifamily had a higher absolute gain to 5.11% from 3.26%. The change between June and July 2024 was lodging (+5 basis points); multifamily (-6 basis points); office (+46 basis points); and retail (+7 basis points).

An interesting aspect of the new report is the focus on the largest CMBS loans that missed payments in July, moved to a non-delinquent status, and received modifications. Moody’s recently noted that a significant increase in large losses — like $100 million — on property sales could signify an approaching market bottom.

Some of the new office delinquencies were 230 Park Avenue in New York City, a $670 million loan that had been a performing matured balloon in June that became nonperforming in July. That one property represented about a third of the newly delinquent office loans. There were also the $164.4 million Queens Atrium in Long Island, City, NY; the $243 million Lafayette Centre in Washington, D.C.; and the $238.9 million Selig Portfolio loan in Seattle.

In multifamily there was the $221 million MFP Portfolio loan, backed by 43 apartments across the U.S., and the $130 million The Centre loan in Cliffside Park, NJ.

Lodging saw some large cured loans, like the loan on the $124.2 million Gansevoort Park Avenue in Manhattan and the $112 million Hotel Bossert loan against the Hotel Bossert in Brooklyn, NY.

The $300 million Santa Monica Place loan also saw a cure with having been in delinquency in May but turned to a grace period in July, though that might be temporary. And the $105 million loan piece of the $380 million Bronx Terminal Market in New York City, which moved from a nonperforming matured balloon to a performing one in July.