NEW YORK CITY—Monthly declines in the delinquency rate for CMBS have now made it four in a row, with Trepp LLC reporting a 19-basis point drop from September's reading of 5.4%. Improvements were registered for all five major property types, according to Trepp data, and year-to-date delinquency levels are lower than the year-end 2016 rate for the first time in 2017.

Trepp notes that following a post-recession low of 4.15% in February '16, the late-pay rate for CMBS moved up in 13 of the 16 months between March of last year and June of this year. However, according to Trepp's latest report, “now that the dreaded 'wave of maturities' has passed, delinquency levels have receded as well.”

October's decline in the CMBS delinquency rate to 5.21% marked the second-biggest monthly drop over the past 19 months. The October reading is just 23 bps points higher than the year-ago level, and two basis points lower YTD.

“For the past few months, we've been saying that further declines in the delinquency rate could be expected,” says Manus Clancy, senior managing director at Trepp. “That certainly rang true in October, as more loans find refinancing or resolution ahead of their balloon dates. With the wave of maturities almost at its end, decreases in the overall reading should continue for the next few months.”

Among property types, hotels posted the biggest improvement, with the sector's delinquency rate dropping 42 bps to 3.42% for October. The month's second-largest decrease belonged to the industrial sector, with a 31-bp improvement to 6.24%.

Office delinquencies fell by 18 bps to reach 6.92% in October. Retail, the second worst-performing property type after office, posted a more modest eight-bp decline to 6.47%. Apartments' month-over-month diminution of delinquencies was even smaller, but the two-bp improvement brought it back below the 3.00% mark, where it has been over most of the past year.

Last month saw just $660 million in CMBS loans become newly delinquent last month, representing the lowest monthly total in more than three years. Because of a nearly identical volume of loans which were cured in October, the 16 bps of upward pressure from the new delinquencies was nullified. Additionally, Trepp says approximately $750 million in previously delinquent debt was resolved last month.

Instant Insights /

CMBS Late-Pays Dip for All Major Sectors

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