Commercial mortgage delinquencies rise, despite falling vacancy rate

Despite positive future outlooks regarding the commercial real estate industry, the delinquency rate of commercial mortgage-backed securities reached a new all-time high this month.

Despite positive future outlooks regarding the commercial real estate industry, the delinquency rate of commercial mortgage-backed securities reached a new all-time high this month.

According to a recent report from Trepp, the CMBS delinquency rate rose to 10.04 percent. This is compared to the end of 2011, when mortgage records show that the rate was at 9.51 percent. Experts say that this surge is a result of a number of five-year commercial mortgage reaching their maturity date. Delinquencies in the industrial, multifamily and hotel sectors were the most prominent.

CMBS delinquencies surge in 2012

Meanwhile, a year ago at this time, the delinquency rate was at 9.6 percent, the report added. During the three months leading up to May, the delinquency rate spiked 67-basis points. Some industry analysts are concerned that this uptick could have a significant impact on the confidence of real estate investors and developers.

"Whether the rate creeping into double digits for the first time carries some psychological impact remains to be seen," the report said.

Yet his increase in mortgage delinquencies was not totally unexpected. As mentioned before, experts claim the increase in a result of the maturing of a number of CMBS. Trepp made a note of the possibility of this future occurrence in a report released at the end of 2011. 

Future of commercial real estate promising

However, even though the delinquency rate increased in May, the future of the commercial mortgage industry looks bright, according to a recent report from Keefe, Bruyette & Woods. In a recent report titled "Location, Location, Location: Commercial Real Estate MSA Tracker," the company indicated that the commercial vacancy rate decreased in a number of major metropolitan areas during the first quarter.

"Not surprisingly, better job growth is a common theme for better-performing markets," the report said. "When compared to 4Q of 2011, Baltimore and Seattle had the most overall significant improvements in rankings, while Dallas and San Bernardino/Riverside reported the most deterioration in expected future real estate fundamentals."

Even though Baltimore and Seattle showed that greatest improvement, they were not the metro areas the the lowest vacancy rates. Real estate data shows that Austin, Houston and San Francisco claimed top positions during the first quarter. In contrast, Detroit, Cleveland, Chicago, Los Angeles and Philadelphia had the highest commercial vacancy rates in the country.



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