Dive Brief:
- Delinquency rates for apartment commercial mortgage-backed securities fell 14 basis points to 6.98% in November, after topping 7% in October for the first time since December 2015, according to a report from data firm Trepp.
- After rising 23 bps in October, the Trepp CMBS delinquency rate for commercial real estate fell 20 basis points to 7.26% in November. It has only fallen three months this year. The delinquent balance rose $5.8 billion to $603.9 billion.
- Lodging, which rose 10 bps to 6.17%, and industrial, which increased 3 bps to still-low 0.67%, were the only property types to see increases in their CMBS delinquency rate in November. Distress in the hotel industry can create adaptive reuse opportunities for apartment developers.
Dive Insight:
In October, delinquency rates for apartment commercial mortgage-backed securities rose 53 basis points to 7.12%, according to Trepp. Multifamily delinquencies sat at 6.11% six months ago. A year ago, they were 4.18%, according to Trepp.
Even with the decline in September, Mark Silverman, partner at law firm Troutman Pepper Locke, said he expects multifamily CMBS delinquencies to rise into 2026.
“We have seen an uptick in multifamily transfers into special servicing and expect that trend to continue,” Silverman said in emailed comments to Multifamily Dive.
Deferred maintenance, inflated rent rolls and other questionable issues with some projects are among the problems he sees. “With maturities coming due, rents remaining relatively flat for many projects, and interest rates remaining higher, refinancing options are less likely,” Silverman said.
So far, Silverman said he has mainly seen CMBS issues with low-income housing, but he expects problems. “We anticipate issues to grow in market-rate multifamily projects as well,” he said.
Part of the problem, Silverman said, is issues in the broader economy. He also believes rents cannot continue to rise.
“If folks lose their jobs and income, they are no longer able to pay the higher rents,” Silverman said. “If the job market stays flat or declines, those folks who are laid off may not be able to find replacement jobs. If new jobs aren’t created, there are also not new tenants to fill that void in market-rate buildings.”
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