U.S. CMBS loan defaults edged lower in 2022 as post-pandemic stabilization of asset performance and property cash flows continued, according to Fitch Ratings. However, the rating agency also reported that the pace of defaults accelerated in 2022’s second half and that 2023 will bring more of them.
Total annual and cumulative default rates for 2022 were 0.3% and 17.9%, respectively, down from 0.4% and 18% in 2021 – marking two consecutive years of declines after peaking at 3.3% & 18%.2 % following pandemic-related disruptions during 2020 . The second half saw a “significant increase” in maturity defaults as interest rates rose, Fitch said..
Fitch anticipates an overall increasing trend for defaulting loans to reverse course by 2023 due to higher interest rates weakening commercial real estate fundamentals along with tightening credit leading to more refinance challenges & thus greater number of defaults . CMBS issuance volume is expected be lower than usual due banking sector volatility & elevated interests rate making it harder for borrowers seeking refinancing options .
Among all Fitch rated CMBS , office loans had highest increase with 49 % or $1 billion 58 million accounting total share among all other categories
