It would appear the world of commercial real estate is only just beginning to show it’s true frailty as a result of the recession. Continued job losses have led to increased loan defaults. Add on hotel underperformance and you have the makings of yet another increase in Commercial Mortgage-Backed Securities (“CMBS”) delinquencies. CMBS late-pays in the U.S. jumped again in October to 3.86%. The office sector had the largest increase in delinquencies since September with an increase of 19.4% followed by the hospitality industry with a 16.5% increase.
Delinquency rates by property types:
Office – 2.29%
Hotel – 6.81%
Retail – 3.55%
Multifamily – 6%
Industrial – 3.09%
Office delinquencies increased $557.4 million in October. Industry analysts expect continued job losses to increase pressure on the office sector. With leases expiring over the next 24 months on space not utilized by tenants who have downsized, office performance isn’t expected to trough for a few years.
source: CoStar
