Delinquency Rates for Commercial Properties Increased in Fourth-Quarter 2023
January 16, 2024
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WASHINGTON, D.C. (January 16, 2024) — Delinquency rates for mortgages backed by commercial properties increased during the fourth quarter of 2023, according to the Mortgage Bankers Association's (MBA) latest commercial real estate finance (CREF) Loan Performance Survey.
"Ongoing challenges in commercial real estate markets pushed the delinquency rate on CRE-backed loans higher in the final three months of 2023," said Jamie Woodwell, MBA's Head of Commercial Real Estate Research. "Delinquency rates jumped to 6.5 percent of balances for loans backed by office properties and to 6.1 percent for lodging-backed loans. Delinquencies for loans backed by retail properties remain elevated from the onset of the pandemic but were unchanged during the quarter. Delinquency rates for multifamily and industrial property loans both increased marginally but remain much lower.”
Woodwell continued, “Long-term interest rates have come down from their highs of last year, which should provide some relief to some loans, but many properties and loans still face higher rates, uncertainty about property values and – for some properties – changes in fundamentals. Each loan and property faces a different set of circumstances, which will come into play as the market works through loans that mature this year.”
The balance of commercial mortgages that are not current increased in December 2023 (compared to September 2023).
- 96.8% of outstanding loan balances were current or less than 30 days late at the end of the third quarter, down from 97.3% at the end of the third quarter of 2023.
- 2.3% were 90+ days delinquent or in REO, up from 2.2% the previous quarter.
- 0.3% were 60-90 days delinquent, up from 0.2% the previous quarter.
- 0.6% were 30-60 days delinquent, up from 0.3%.
- Loans backed by office properties drove the increase.
- 6.5% of the balance of office property loan balances were 30 days or more days delinquent, up from 5.1% at the end of last quarter.
- 6.1% of the balance of lodging loans were delinquent, up from 4.9%.
- 5.0% of retail balances were delinquent, flat from the previous quarter.
- 1.2% of multifamily balances were delinquent, up from 0.9%.
- 0.9% of the balance of industrial property loans were delinquent, up from 0.6%.
- Among capital sources, CMBS loan delinquency rates saw the highest levels.
- 5.1% of CMBS loan balances were 30 days or more delinquent, up from 4.4% last quarter.
- Non-current rates for other capital sources remained more moderate.
- 0.9% of FHA multifamily and health care loan balances were 30 days or more delinquent, up from 0.8%.
- 0.9% of life company loan balances were delinquent, up from 0.7%.
- 0.5% of GSE loan balances were delinquent, up from 0.4%.
MBA's CREF Loan Performance survey collected information on commercial and multifamily mortgage portfolios as of December 28, 2023. This month's results build on similar surveys conducted since April 2020. Participants reported on $2.7 trillion of loans in December 2023, representing 58 percent of the total $4.6 trillion in commercial and multifamily mortgage debt outstanding (MDO).
For more information on MBA's CREF Loan Performance Survey, please visit: www.mba.org/store/products/research/general/report/commercial-real-estate-finance-loan-performance-survey.