Fitch finds CMBS delinquencies dip for first time in four months
Delinquencies on loans pooled into commercial mortgage-backed securities dipped in March for the first time in four months, but the upward trend should return next month and continue through 2011, according to Fitch Ratings. The overall delinquency rate stood at 8.74% in March, a decrease of 2 basis points from the previous month and the first drop since October. Fitch analysts said despite the deceleration of delinquencies, which fell across four of the five main property types last month, the upswing projecting for the rest of the year will likely take the rate to a peak around 10%. For March, the delinquency rate on hotels fell the furthest, dropping 21 bps to 14.12%. Delinquencies on multifamily loans dropped 16 bps to 17.42%, followed by a 15 bps decline in retail to 6.89% and a 2 bps decrease in industrial loans to 9.38%. The only sector to experience an increase in delinquencies in March was offices, which had a 5.95% delinquency rate, a 10 bps increase from the previous month. Commercial real estate will face financial issues for some time. According to the Blackstone Group (BX), $2.5 trillion of CRE debt will mature over the next seven years, and property owners have substantial liquidity needs. However, Fitch Managing Director Mary MacNeill said there are signs of improvement industry wide. "Preliminary indications on year-end 2010 financials that have come in thus far are somewhat encouraging," MacNeill said. "Net operating income declines have slowed or reversed, which coupled with stronger market liquidity and new CMBS issuance should continue to help slow the rise in CMBS delinquencies going forward." Write to Jon Prior. Follow him on Twitter @JonAPrior.