NEW YORK CITY—For CMBS performance, the preceding four weeks have been the merry month of May. Trepp said Friday that the delinquency rate for securitized commercial mortgages has now improved for 12 consecutive months. Separately, Fitch Ratings on Friday gave favorable marks to the outlook for most of the major property sectors.
At month’s end, the CMBS delinquency rate had reached 6.27%, down 17 basis points from April. A year ago, Trepp measured it as 9.07%; it peaked at 10.34% in July 2012.
May saw $1.3 billion in new delinquencies, offset by $1 billion in resolutions and $800 million in cured loans. Accordingly, the total balance of delinquent loans fell to $33.6 billion from $34.1 billion in April.
“The CMBS market continues to just plug along nicely,” says Manus Clancy, senior managing director at Trepp. “In each of the past two years, the market has seen springtime swoons that led to noticeable spread widening;” however, at present new-issue spreads “are near their 2014 tights, the new-issue dance card is full for the next few months and the resolution of defaulted legacy loans continue to push the delinquency rate lower.” However, Bank of America Merrill Lynch earlier this month cut its full-year forecast for new issues.
Among property types, all five have shown year-over-year improvement, and only industrial delinquency increased over April levels, ticking up 25 bps to 8.94%. A year ago, nearly one-eighth of industrial CMBS loans were delinquent.
During May, hotel late-pays fell by 61 bps to 5.71%, for both the best Y-O-Y and month-to-month improvement of any property sector, says Trepp. Retail, though, is still the best-performing sector at 5.46%. Office delinquency declined to 6.6%, while multifamily maintained its ranking as the worst performer among property types, with a one-bp drop to 9.82%.
In looking at property sectors generally, Fitch ranks the outlook for both multifamily and hotels as “stable.” For both sectors, the ratings agency is casting a weather eye on concerns about possible oversupply in some markets.
Retail is considered “stabilizing” by Fitch, despite the specter of rumor or announced store closings by a number of major players in the sector. The outlook for office is in a transitional stage of “negative to stabilizing,” says Fitch, which sees “continuing divergence between class A and class B, and urban and suburban performance.”