According to a recent report by Trepp, four sectors of the commercial property market experienced significant fluctuations in their CMBS delinquency rates in December 2024. The lodging sector saw a decrease of 78 basis points to 6.14%, while the remaining three sectors all saw increases.
Retail properties had the largest increase, with delinquencies rising by 86 basis points to reach 7.43%. Office properties also experienced a notable increase, with delinquencies climbing by 63 basis points and reaching an all-time high of11.01%. Multifamily properties saw an increase as well, growing by40 basis points and reaching a rate of4.58%. However, industrial properties bucked this trend and actually saw a slight decrease of three bps down to0.29%.
The biggest contributor to retail delinquencies was the Natick Mall loan for $505 million ona1,039965-square-foot superregional mall located in Natick,Massachusetts.The borrower has stated that they do not believe it is currently feasible for themto secure financing due todifficultieswith debt service levelsand co-tenancy concerns relatedto anchor boxes.
In terms off office propertydeliquincies,the largest new addition was seeninthe formofa$670-millionloanon230 Park Avenuebackedbythe Helmsley BuildinglocatedinMidtown Manhattan.Trepp’s report noted that this loan had been fluctuating between performing and non-performing throughout2024,butitwasperforming from July until November.However,inDecember,itwas revealedthatthespecialservicerhadinitiatedforeclosureproceedingsdue tonon-paymentofthematuredballoonpayment.
Overall,theCMBSdeliquincyrateforretailandofficepropertieshasincreasedsignificantly,andthisisconcerningforinvestorsandlendersalike.Thisisanimportanttrendtomonitoraswemoveforwardin2025.
