The CMBS market showed signs of further deterioration in July, with delinquencies climbing for the fifth straight month. According to data from Trepp, the CMBS delinquency rate increased by 10 basis points in July, reaching 7.23%. That marks a substantial year-over-year jump of 180 basis points for the period ending in June.
Month over month, the dollar volume of delinquent CMBS loans grew to $43.3 billion, as the total outstanding CMBS balance expanded to $598.9 billion, up from $593.4 billion in June, Trepp reported. The persistent upward trend has become more pronounced over the last year: the overall CMBS delinquency rate stood at 5.43% one year ago and 6.56% as recently as six months prior.
Across property types, shifts were generally modest. No segment saw either an increase or decrease greater than 25 basis points. Multifamily was the only sector to post a monthly increase, rising 24 basis points to 6.15%. Meanwhile, lodging and retail posted slight improvements—lodging fell 22 basis points to 6.59% and retail slipped 16 basis points to 6.9%. The office delinquency rate edged down just 4 basis points to 11.04%, following a record high of 11.08% in June.
A closer look at loan performance reveals a concerning dynamic: newly delinquent loans far outpaced those being resolved. Trepp found that newly delinquent loans totaled more than $4.4 billion in July, significantly exceeding the roughly $3 billion in cured loans for the same period. The mixed-use, retail, and office sectors each saw more than $800 million in new delinquencies, with each sector's new delinquencies at least $150 million above their cures. The month saw 129 loans become newly delinquent. The 10 largest of these accounted for more than $2.1 billion, or half the monthly rise.
Broader measures further underscore market weakness. Including loans that are past their maturity date but still current on interest payments, the delinquency rate would rise to 9.36%—up 65 basis points from June. Loans that are 30 days delinquent made up 0.3% of the total, up by 2 basis points, while loans more than 60 days delinquent, in foreclosure, REO, or classified as non-performing balloons increased by 8 basis points to 6.93%. If defeased loans are omitted from the calculation, Trepp reports the overall delinquency rate would stand at 7.41%, up 9 basis points month over month.
Focusing on post-financial-crisis securities, the CMBS 2.0+ segment—defined as CMBS issued after the 2008 financial crisis with enhanced regulations and risk controls—also reflected the broader trend. The CMBS 2.0+ delinquency rate climbed 9 basis points in July to 7.11%. Within this category, the share of loans classified as seriously delinquent increased by 7 basis points to 6.81%. Excluding defeased loans, the seriously delinquent rate for these securities would be 7.3%, up 9 basis points.
For CMBS 2.0+ specifically, performance varied across property types. Delinquency rates stood at 0.52% for industrial, 6.52% for lodging, 6.14% for multifamily, 10.91% for office, and 6.59% for retail. Industrial and multifamily sectors saw marginal increases in delinquencies, while lodging, office, and retail experienced slight improvements, according to Trepp.
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