Problem Office Loans Drive Increase in CMBS Delinquencies

For the first time in 10 months, there has been an increase in delinquencies in the loans which are part of commercial mortgage-backed securities, Fitch Ratings said. It attributes the rise to continuing problems in the office sector.

After falling to a three-year low in February, CMBS late-pays increased two basis points in March to 7.63% from 7.61% a month earlier.

“CMBS loan resolutions edged out new additions to the index, but a drop in new issuance volume failed to keep pace with the runoff, thus causing the delinquency rate to rise,” said Fitch managing director Mary MacNeill, who added the lack of new issuances in March this could mean the increase may be short-lived.

Between February and March, delinquent conduit loans securing office buildings increased 32 bps to 8.5%.

However, all other categories saw their delinquency rates improve. Industrial properties still have the highest rate of bad loans at 9.41%, but that is 20 bps better than in February. There was a 23 bps improvement in multifamily delinquent loans to 8.91%, hotels improved 61 bps to 7.71% and retail improved 26 bps to 7.05%.

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