Do we have a Commercial Real Estate crisis on hand?
a surge in delinquencies
Commercial Real Estate Crisis?
The delinquency rate on commercial mortgage-backed securities (CMBS) for offices spiked to 9.4% in October, the highest in 11 years. The delinquency rate of office CMBS loans has now risen by 5 TIMES over the last 2 years. Delinquencies are officially rising at a pace only seen after the 2008 Financial Crisis. This puts the office CMBS delinquency rate on track to surpass an all-time high of 10.3% seen in July 2012. Meanwhile, the overall US CMBS delinquency rate rose to 6.0%, the most since the 2020 pandemic. The commercial real estate crisis is real. X user The Kobeissi Letter
Can the wheels come off the CMBS soon? This should be owned by current administration.
Other News:
Office CMBS Delinquency Rate Spikes to 9.4%, Highest Since Worst Months after the Financial Crisis - WolfStreet
The office delinquency rate reached 9.37%, up from 8.36% in September and 5.75% a year ago. Who will take the hit? - ConnectCRE
Banks face growing risk as double defaults on commercial loans mount - FT
Commercial real estate maturity wall $950B in 2024, peaks in 2027 (Source: S&P Global article). More mortgages are expected to mature in the coming months and refinancing would imply costs increase at the (recently) heightened interest rates.
Fortune’s article above has reported that we are expecting $1.5 trillion of commercial real estate debt is due in 2025, with challenges expected for refinancing.
My muse
There could be spiraling effects that spread from real estate to banking, construction, materials, retail (for shops supporting the vicinity) and the local state government. Banks have varying exposure to this. Will this lead to more banking volatility? This is something that we should watch.
I recommend to monitor this sector as this could lead to domino effects of a wider market concerns.