Once again, there is talk of an impending recession. These predictions and forecasts come up rather regularly nowadays, but just as often lately, so do reports showing a strong commercial real estate industry.
An example is Trepp’s report on August CMBS delinquencies, which the research firm says are the lowest since the recession, at 2.54 percent across nearly all commercial real estate sectors. This number is down from 3.64 percent in August 2018, and the post-recession peak of June 2017, when they were 5.75 percent.
Since June, the hotel sector experienced the biggest drop in delinquencies, from 2.41 percent of total loans to a current 1.54 percent. That falls in line with recent hospitality industry data, as reported by Hotel News Now. Occupancy rose to 73.8 percent in July, up 0.4 percent from the prior year, while ADR (average daily rates) were $135.04 (up 0.7 percent), and RevPAR (revenue per occupied room) hit $99.62, up 1.1 percent.
Retail also fell significantly since June, from 4.44 percent to 4.07 percent. Despite the major store closings plaguing the industry, retail real estate is faring rather well, according to many reports. Second-quarter retail vacancy rates were at 6.2 percent, said CBRE, unchanged from the prior quarter and slightly lower than the year before.
Industrial, at 1.75 percent, actually rose from July’s 1.7 percent, but was down from 1.94 percent in June. It was a similar story for office, at 2.83 percent, a rise from July’s 2.71 percent, but down from 3.02 in June.
Multifamily was the only sector to see a continuing increase in August, at 2.39 percent, from 2.11 percent in June. However, multifamily construction doesn’t seem to be keeping up with demand, so it’s doubtful that this sector is seeing any kind of significant downturn any time soon.
The largest non-performing beyond-maturity loan in August tracked by Trepp was $240 million for the 1500 Market Street, and office asset in Philadelphia. Called Centre Square, it was purchased in 2017 for $328 million.
The second largest was $110 million, for Colonie Center, a retail center in Albany, N.Y. That mall, which is being revitalized, was put up for sale earlier this year.
Despite a few sizable assets, the CMBS maturity situation continues to look favorable. So, if another recession is on the way, at least many of the problems in the commercial real estate industry as a result of the last one are resolved in this arena.
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.