After Steady Improvement, Delinquency Rates Tick Higher

Delinquency rates for commercial mortgages across property types increased in the first quarter, thanks to continued erosion in the office sector.  

Research from Trepp shows that concerns about the sector continue to increase, as the delinquency rate rose over the past few quarters in what the firm calls a “delayed reaction” to low office occupancy rates during the pandemic. The office delinquency rate rose from 1.3% in Q4 to 1.8% in Q1, and Trepp says the sector “will bear a closer watch through 2022 and beyond, as leases roll in the coming months and loans come up for refinancing.” Risk ratings for office loans have increased, with lenders in the Mid-Atlantic region expressing “elevated concerns” about risk across the three largest loan types. New York largely accounts for the region’s high proportion of criticized loans, at 31.7%.