Remember the days when delinquency rates for CMBS were less than 1% and the industry viewed a 5% or even 10% default rate as unfathomable? Well, hold dear those memories, because they are unlikely to cycle back any time soon.
Indeed, it is widely expected that delinquencies will go beyond the 10% mark this year. A recently-released report from Delta Associates and Real Capital Analytics finds that, from February 2010 to February 2011, the 12-month delinquent unpaid balance of CMBS rose $14.6 billion, or 31%, to $62.4 billion for a delinquency rate of 8.3% of the $754 billion total unpaid balance.
Potential problem loans, however, make it likely that the delinquency rate will exceed 9% in 2011, according to Realpoint data, with the delinquent unpaid balance reaching $65 billion to $70 billion by December. For distress investors, such statistics naturally mean that there are still opportunities, despite the seemingly desert landscape that is distress investment at the moment.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
