Delinquency rates for commercial properties increased modestly in the third quarter, with office and multifamily sectors showing the highest delinquency levels, according to a report released Tuesday by the Mortgage Bankers Association (MBA).
The MBA found the number of mortgages in some form of delinquency increased during the third quarter. The overall trend, however, in the share of loans that were delinquent varied depending on property types.
The office sector continued to suffer from the highest rates, with 90-day delinquencies ballooning in recent years to more than 5% and total delinquencies of nearly 8% in September. Many multifamily delinquencies — which is just over 2% — also shifted to 90 days or more during the past year.
Lodging, however, has delinquency rates that are a fraction of what they were at the end of 2020 when rates were about 20%. Retail delinquencies have also fallen considerably since 2020 when they reached above 10%.
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Industrial delinquencies have generally remained below 2% since 2020. But it has suffered a few peaks of concern, including in the third quarter when delinquency rates rose above 2%. The healthcare sector has also seen its share of peaks and valleys in the past five years but overall has experienced a decrease in delinquency rates.
MBA reports that commercial mortgage-backed securities have experienced the highest delinquency rates, with 4.97% of loan balances 30 or more days delinquent. That number is up from 4.82% in the second quarter. Delinquency rates for other capital sources remained relatively low compared to their historic levels.
“Challenging fundamentals, particularly in the multifamily and office markets, along with higher rates, are having an impact on performance,” said Mike Fratantoni, MBA’s senior vice president and chief economist, in a press release. “However, delinquency rates remain historically low across most capital sources. The large number of scheduled maturities coming due amidst the recent spike in interest rates will continue to be a headwind for commercial mortgage performance in the quarters ahead.”
