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CMBS Delinquency Rate Dipped Further in February

Most property sectors either posted delinquency declines or single-digit upticks. That might change in the coming month.

In some good news for the commercial real estate industry this month, CMBS delinquencies continued to decline in February.

Ratings firm Fitch reported that the all-property 60+ day CMBS delinquency rate fell by 2 basis points month-over-month to 1.35 percent. The metric was at its lowest point since February 2009.

CMBS delinquencies went down in the office, industrial and retail sectors, in addition to mixed-use properties and sectors Fitch collectively classified as “other.”

However, both the hotel and the multifamily sectors experienced slight upticks in delinquencies. On Friday, Fitch published a report noting the outlook for hotel CMBS performance was changing from stable to negative, as it will be among the first property sectors to see the impact of coronavirus-related cancellations on cash flow.

Loans on office properties showed the most improvement in February, with CMBS delinquencies moving down 7 basis points, to 1.33 percent. Retail delinquencies went down by 6 points, to 3.59 percent (still among the highest figures in the real estate universe) and industrial delinquencies declined by 4 basis points, to 0.32 percent.

On the other hand, delinquencies on loans backed by multifamily properties rose by 3 basis points, to 0.41 percent, and on loans backed by hotel properties by 2 basis points, to 1.49 percent.

The property sub-sector that presented the biggest issue for the CMBS market was student housing. It posted the highest delinquency rate overall, at 4.59 percent, and registered the biggest month-to-month jump, at 56 basis points. The uptick was caused by two new sizeable loan delinquencies backed by student housing assets, according to Fitch. One involved a property near Texas A&M University and the other near Iowa State University.

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