Commercial real estate loan credit trends are projected to worsen until 2025 for CMBS, U.S. banks, and life insurers according to Fitch Ratings. Despite this decline, losses are expected to remain within ratings sensitivities. The office sector is anticipated to experience the most deterioration in property net cash flows, with other sectors such as retail, hotel, multifamily and industrial also facing weakening conditions.
Fitch predicts that U.S. CMBS loans will see a significant increase in delinquencies due to macroeconomic challenges and high interest rates leading up to maturity defaults. By 2024-2025 it is estimated that overall delinquency rates will double from 2.25% (November 2023)to 4-4/9%.
In November of last year alone there was a notable rise of office properties experiencing delays in payment by at least two months (64 basis points). This trend was seen across majority of newly rated $1 billion+ US CMBS loans which included both office and multifamily properties.
Looking ahead into the future forecasted numbers show an even greater increase in delinquent payments for both offices (8-10%)and multifamily units(1%-1/2%).
