Office-Backed Loan Delinquency Continues Climb, Posting Biggest Jump Since September

CMBS delinquencies continued their steady climb to start 2024, led again by office, which clocked its highest monthly uptick in past-due loans since September.

The overall delinquency rate for CMBS loans reached 4.66%, according to Trepp, with office-backed loans increasing 48 basis points month-over-month to 6.3%.

Office delinquencies are up dramatically over their position a year ago, when 1.86% of office-backed CMBS loans were delinquent.

Multifamily delinquencies, on the other hand, declined month-over-month from 2.62% to 1.91%. Trepp's report attributes the drop to the disposition of a delinquent single-asset, single-borrower apartment loan in San Francisco.

The report doesn't name the loan, but in January, Brookfield Properties and Ballast Investments bought $915M in underwater multifamily mortgages from Veritas Investments. A portion of this was a $668M CMBS loan in a SASB package.

Retail-associated CMBS maintained its position behind office with a delinquency rate of 6.27%, a 31-basis-point downtick from last year.

Lodging-associated CMBS delinquencies have also been consistently high over the last year, ending January at 5.46% according to Trepp data.

Industrial's delinquency rate remains nearly nonexistent at 0.4%.

Overall delinquencies were up from 2.94% a year ago, but even the current 4.66% is well short of the record 10.34% in July 2012, during the aftermath of the Global Financial Crisis. In June 2020, during the early grim days of the pandemic, delinquencies rose to a brief high of 10.32%.

The percentage of CMBS loans that are seriously delinquent is 4.42%, according to Trepp, up 14 basis points from December.