CRED iQ's Overall CRE Delinquency Rate Declines but Office Distress is Imminent

CRED iQ's Overall Delinquency Rate Declined from 4.02% to 3.84% in April 2022

RADNOR, Pa., April 5, 2022 /PRNewswire/ -- The CRED iQ overall delinquency rate for CMBS declined for the 22^nd consecutive month with all major property types exhibiting improvements compared to the prior month. The delinquency rate, equal to the percentage of all delinquent specially serviced loans and delinquent non-specially serviced loans was 3.84%, which compares to the prior month's rate of 4.02%.

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Lodging has shown the most improvement in individual delinquency rates by property type with a 46% decline over the trailing 12 months. The outstanding balance of delinquent lodging loans decreased by more than $450 million compared to the prior month. The lodging delinquency rate was 7.99% this month, which compared to 8.46% a month ago and 14.73% a year ago.

The delinquency rate for office moved nominally to 1.88%, compared to 1.89% as of February 2022. A subplot to the nominal month-over-month decline is the industry's anticipation of a special servicing transfer for the $308 million 1740 Broadway loan. Commercial Observer first broke the news of Blackstone handing back the keys to 1740 Broadway in a March 21, 2022 article. The property's largest tenant, L Brands, had a lease expire in March 2022 and the company vacated, relocating to 55 Water Street.

CRED iQ's special servicing rate, (includes delinquent and non-delinquent loans), declined month-over month to 6.09% from 6.43%. A combination of workouts, liquidations, cures, and mortgage rehabilitations resulted in the decline of the special servicing rate for the fourth consecutive month. That said, the $80 million Chicago Ridge Mall was among the largest loans to transfer to the special servicer this month. The loan has a near-term maturity date in July 2022 and a timely payoff appears to be unlikely.

Aggregating the two indicators of distress – delinquency rate and special servicing rate – into an overall distressed rate (DQ + SS%) equals 6.19% of CMBS loans that are specially serviced, delinquent, or a combination of both. Distressed rates declined across all property types, and the overall distressed rate declined compared to the prior month rate of 6.40%.

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SOURCE CRED iQ