Matthew McGovern, Director
GRS | Corteq
(646)760-0851
[email protected]
GRS Group tries to touch on CMBS trends on a relatively regular basis. This is because of the amount of them hitting maturity around this time. Also, because of the anticipatory concerns that were sparked by the commercial real estate industry about a wave of delinquencies.
Well, what we have seen of late is pretty good news.
First of all, Fitch Ratings reports that CMBS delinquencies fell for the fourth straight month in October. This dropped the overall rate three basis points from September to 3.5 percent. New delinquencies for the month came in at $503 million, significantly below the year-to-date monthly average of $741 million.
That said, here is how the major commercial real estate property sectors fared individually in October from the previous month:
- Multifamily stayed flat at 0.68 percent.
- Hotels fell to 2.72 percent from 2.85 percent.
- Mixed-use assets dropped to 3.24 percent from 3.32 percent.
- Industrial hit 4.1 percent, falling from 4.24 percent.
- Offices slid down to 5.76 percent from 5.84 percent.
- Retail was the only sector that had an increase, rising to 6.12 percent from 6.1 percent. This is telling because the biggest Q3 delinquency was $80 million and tied to the Bangor (Maine) Mall, which counts J.C. Penney and Sears among its anchors.
- Meanwhile, Trepp concentrated on the third-quarter CMBS issuance rate. During the period, there was $26.8 billion in CMBS loans, the best run since the third quarter of 2014. Year-to-date issuances after Q3 ended up at $58.4 billion, a 38 percent increase through the same year-ago period.
Commercial real estate’s hotel sector has been getting a large share of loans lately. In fact, from July through September, it accounted for just above 36.4 percent of all CMBS debt issued. Year to date, 25 percent of all new issuances were hospitality focused, and the largest loan in the third quarter was for a Motel 6 portfolio.
CMBS issuance last year was tallied at about $76 billion, and this year had pretty low expectations. In its latest report, Trepp now sees the year ending with between $80 billion and $85 billion, which is quite an uptick.
At the beginning of the Q3 review, Trepp says: “…so far in 2017, CMBS issuers have had perfect conditions for lending, including tighter spreads than those seen in 2016, low interest rates, yield-hungry investors, an absence of volatility, and an ample volume of loans in need of refinancing.”
So, we will find out soon how the remainder of the year shakes out.
About GRS Group
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.
Through the company’s proprietary management process, Global Services Connection, GRS Group delivers an integrated suite of services including Financial Advisory, Transaction Management, Assessment and Title Insurance. We provide a single point of contact, capable of leveraging the GRS Group portfolio of companies and delivering customized solutions to assist our clients in achieving their investment goals.