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High Rates, Tighter Lending Conditions Push Office Loan Delinquencies To 5% in July


The number of borrowers having trouble staying current on their loans continues to grow, including in the office sector. 

The delinquency rate for CMBS loans rose to 4.4% in July, but for office loans, that number reached 5%. 

The rise in the number of delinquencies of these loans was attributed to both higher interest rates and tightened lending conditions, according to MarketWatch, citing Trepp data. 

Office's delinquency rate reaching 5% puts it at roughly the halfway point to the historic 10.3% high for the entire CMBS sector, reached in July 2012 as the repercussions of the Global Financial Crisis reverberated. However, retail delinquency rates climbed higher, to 6.9% in July, and hospitality hit 5.9%, Trepp found.

Earlier this month, data from credit rating agency KBRA estimated the total of all newly delinquent CMBS loans as of this month was $12B. More than one-third of the loans that had become delinquent or entered special servicing in July were connected to office properties.

"While the rest of the U.S. economy has seen relief in terms of higher equity prices, better-than-expected corporate earnings, and falling inflation numbers, the commercial real estate (CRE) market continues to be left behind," Trepp analysts wrote in a Tuesday client note, MarketWatch reported. 

In May, the overall delinquency rate was 3.65%, a majority of which was attributed to the office market. 

Related Topics: Trepp, CMBS Loans