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CMBS Delinquency Rate Reaches a New Low in July

Research and ratings firms that track the market predict that CMBS delinquency will be below 3.0 percent by the end of the year.

The 30-plus-day CMBS delinquency rate reached a new post-crisis low in July, at 3.81 percent, according to research firm Trepp LLC. The figure represents a 168-basis-point decline from the same period last year, and a 14-basis-point decline from the CMBS delinquency rate in June 2018.

 Trepp researchers credit the resolution of distressed legacy loans and a healthy level of new issuance for the decrease and forecast the delinquency rate might fall below 3.0 percent by the end of the year.

This prediction falls in line with a recent forecast from ratings agency Fitch, which put year-end CMBS delinquency rate at between 2.25 percent and 2.75 percent. Fitch attributed its outlook to healthy CMBS issuance levels, the low volume of upcoming loan maturities in the second half of 2018 and loan resolution activity by special servicers, as well as the stable performance of CMBS 2.0 loans.

Morningstar Credit Ratings forecasts that CMBS delinquency rate will average below 2.5 percent for the rest of the year.

According to Trepp data, retail properties posted the highest delinquency rate in July, at 5.55 percent, continuing the trend from earlier in the year.

Lodging properties, on the other hand, posted the lowest CMBS delinquency rate of the five core property types, at 2.25 percent. For the past two and a half years, the multifamily sector held the lowest delinquency rate among core assets. In July, the sector posted a delinquency rate of 2.35 percent, an increase of seven basis points from June.

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