NEW YORK CITY—After giving the market an October surprise by ticking up 11 basis points, the delinquency rate for CMBS in November moved back in the direction it has been headed for some time: downward. Trepp says late-pays on securitized commercial mortgages improved by 34 bps, bringing the delinquency rate to 5.8%, its lowest level in five years.

More than $900 million in CMBS loans become newly delinquent in November, which put 18 bps of upward pressure on the late-pay rate. Even so, the monthly improvement was the biggest in 10 months, and delinquencies have dropped by 186 bps since November of 2013. Trepp says $30.7 billion of CMBS loans are now delinquent, a decrease of $1.1 billion from October.

Manus Clancy, senior managing director with Trepp, says the CMBS market is “heading into year-end with a lot of momentum. New issue volume is poised to top last year's total, and delinquency levels continue to drop. Throw in lower energy costs and a drop in the 10-year yield, and you could say the wind is fully at the market's back.”

Along with loans that were resolved or paid off during November, a major contributor to the improvement in late-pays was what Trepp calls the "denominator effect." New issues increased the denominator of Trepp's delinquency rate calculation by about $7 billion.

Even so, as this year winds down, the advent of three years' worth of maturities totaling more than $300 billion draws nearer. At present, all three vintages from the market's peak suffer from delinquency rates above the current average. In the case of 2005-vintage loans, the late-pay rate is 6.53%; for 2006, it's 6.95%; and for 2007, it's 10.41%. For the last batch of CMBS loans issued before the downturn, it's even higher, with 11.32% of 2008-vintage loans currently in arrears.

On a sector by sector basis, multifamily saw the best monthly improvement, as delinquencies for loans backed by apartments fell by 97 bps to 8.83%. The best-performing asset class remains hotel, with November's late-pays at 4.97%, down 38 bps from October. Industrial delinquency dropped 20 bps to 7.49%, office improved by 27 bps to 6.21% and retail delinquencies declined by 21 bps to 5.67%.