CMBS Delinquencies Jump in May

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The U.S. CMBS delinquency rate soared to 7.15 percent in May 2020, according to Trepp LLC’s newly released monthly findings.

The spike marks the largest rise in delinquencies since the analytics firm began monitoring the metric in 2009. Still, May’s rate didn’t break the all-time high of 10.34 percent seen in July 2012.

READ ALSO: Hotel, Retail Lead Late Loans—Will Other Assets Follow?

The CMBS delinquency rate jumped a whopping 481 basis points from the 2.29 percent rate recorded in April 2020, with approximately 5 percent of May’s 7.15 percent figure representing loans in the 30-day delinquent category. Given the pandemic-induced economic turmoil, industry experts had expected a spike, however, the size of the month-over-month increase turned out to be smaller than anticipated.

“Many of the loans that were in the grace or beyond-grace period either stayed in that category or reverted to current, keeping the jump in the delinquency rate from being worse,” Manus Clancy, senior managing director of Applied Data & Research with Trepp LLC and author of the study, noted in the report. “Given that about 8 percent of loans had missed payments for the April remittance cycle, the fact that delinquencies went up less than 5 percent has to be viewed as a small ‘win.’”

CMBS 1.0 Versus CMBS 2.0-plus

The overall CMBS 2.0-plus delinquency rate skyrocketed to 6.19 percent, marking a month-over-month increase of 503 basis points. Currently, 1.10 percent of CMBS 2.0-plus loans are seriously delinquent. At the sector level, the CMBS 2.0-plus lodging delinquency rate topped the category with a 1658 basis-point surge to 18.89 percent. The retail sector experienced a sizable 668 basis-point increase in delinquency rate to 8.19 percent. Other sectors registered a far less dramatic change. The multifamily delinquency rate rose 133 basis points to 3.10 percent, and the office delinquency rate increased 57 basis points to 1.13 percent. The industrial sector recorded the lowest increase in delinquency rate of all the sectors, rising just 71 basis points month-over-month to 0.91 percent.

Looking at CMBS 1.0, the overall delinquency rate increased 110 basis points to 41.74 percent in May. Trepp’s property type analysis reveals that, unlike CMBS 2.0-plus, changes in CMBS 1.0 debt delinquencies were a mixed bag. Both the lodging and retail sectors saw delinquencies increase, rising 753 basis points to 40.45 percent and 293 basis points to 66.23 percent, respectively. However, CMBS 1.0 debt for the three remaining property types saw delinquency rates decline month-over-month. The multifamily delinquency rate dropped 77 basis points to 18.49 percent, and the office rate declined 27 basis points to 35.28 percent. The industrial sector saw its CMBS 1.0 delinquency rate plunge 469 basis points in May to 43.06 percent. Trepp will release CMBS 1.0 delinquency rates for one last time in June. “With CMBS 1.0 loans outstanding dwindling, we plan to retire this statistic beginning in Q3 2020,” according to Clancy.