For the first time since February, the Trepp CMBS delinquency rate has decreased. In September, it fell six basis points to 7.23%. Both the overall delinquent balance and the outstanding balance were down, to $43.5 billion and $601.3 billion, respectively.
The only sector that saw an increase in delinquency was retail, which rose 34 bps to 6.76% following back-to-back months of declines. Delinquency rates in all other sectors retreated in September, the report said.
The lodging sector experienced the largest month-over-month decrease in delinquency, down 73 bps from 6.54% to 5.81%. That is its lowest rate since March 2024, when the rate was 5.45%.
Office posted the second-largest drop, going from 11.66% in August to 11.13%. Multifamily delinquency pulled back 27 bps from 6.86% to 6.59% in September, which remains nearly double its delinquency rate in September 2024 of 3.33%. Industrial’s delinquency rate decreased by four bps from 0.6% to 0.56%.
About $3.7 billion of loans became newly delinquent in September, while $2.9 billion in loans were cured. This was largely driven by the office sector, which saw $2.1 billion in cured loans, which far outweighed the sector's $1.3 billion in newly delinquent loans. Lodging also showed a net decrease in delinquent balance, with more than $800 million in cured loans against $200 million in newly delinquent loans. Delinquent balances increased on net for the mixed-use and retail sectors.
The percentage of loans that are 30-days delinquent was up seven bps to 0.48% from August, while the percentage of loans that are more than 60 days delinquent, in foreclosure, REO or non-performing balloon was down 13 bps to 6.75%.
CMBS 2.0+ delinquency fell six bps to 7.14% in September, and the percentage of loans that are considered seriously delinquent was down 13 bps to 6.66%, said Trepp. CMBS 1.0 refers to CMBS issued before the 2008 financial crisis, characterized by higher loan-to-value ratios and lower debt service coverage ratios. CMBS 2.0+ refers to the second generation of CMBS issued after the financial crisis, incorporating reforms to restore investor confidence, including enhanced underwriting standards, increased disclosure requirements, improved loan servicing practices and stronger risk retention rules in compliance with Dodd-Frank regulations.
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