(Editor's Note: This report is S&P Global Ratings' monthly summary update of U.S. CMBS delinquency trends. )
Key Takeaways
- The U.S. CMBS overall delinquency rate decreased by 2 basis points month-over-month to 2.7% in March.
- Seriously delinquent loans (60-plus-days delinquent) represented 85.7% of delinquent loans in March, with 120-plus-days delinquent loans accounting for 22.5% of delinquent loans in March.
- Special servicing rates increased for retail (by 32 basis points), multifamily (31), and office (29) loans, and decreased for lodging (6) and industrial (1) loans.
- While the overall delinquency rate decreased slightly, by balance, the delinquency rate increased for office (by 44 basis points) loans for the third consecutive month, while the rate for retail (55), lodging (14), industrial (3), and multifamily (2) loans decreased.
The Overall Delinquency Rate Decreased 2 Bps
The overall U.S. CMBS delinquency rate (DQ rate) decreased 2 basis points (bps) month-over-month in March 2023, decreasing to 2.7%. The rate decreased 20 bps from 2.9% a year earlier (see chart 1). By dollar amount, total delinquencies decreased to $20.0 billion, representing a net decrease of $177.2 million month-over-month and a decrease of $1.5 billion year-over-year (see chart 2).
Chart 1
Chart 2
Several Large Loans Moved Into Delinquency
The overall DQ rate increased, with 82 loans totaling $1.7 billion becoming delinquent in March. Table 1 shows the top five of these loans by balance.
The largest delinquent loan in March 2023 was 700 Louisiana and 600 Prairie St., which is secured by a 1.3 million-sq.-ft., 56-story class A office tower and a 966-space parking garage located in Houston. Tenants at the property include TC Energy (23.9% of NRA; February 2036 expiration), Mayer Brown LLP (4.3% of NRA; August 2026), and Baker & McKenzie LLP (4.0%; March 2023). The loan first appeared on the servicer's watchlist in June 2020 due to the loan's upcoming maturity in September 2020. The loan's maturity date was subsequently extended multiple times to September 2023, the final maturity date. The loan was transferred to the special servicer in March 2023. The loan is now in default and was reported as a non-performing balloon loan in March.
Table 1
| Top Five Newly Delinquent Loans In March 2023 | ||||
|---|---|---|---|---|
| Property | City | State | Property type | Delinquency balance ($) |
| 700 Louisiana and 600 Prairie Street | Houston | Texas | Office | 96,000,000 |
| Tysons Metro Center | Mclean | Various | Office | 90,000,000 |
| Pecanland Mall | Monroe | La. | Retail | 75,554,680 |
| The Redford | Houston | Texas | Multifamily | 68,800,000 |
| One City Centre | Houston | Texas | Office | 60,000,000 |
Seriously Delinquent Loan Levels Are Still High
Loans that are 60-plus-days delinquent (i.e., seriously delinquent loans) represented 85.7% of the delinquent loans in March (see chart 3). Loans that are 120-plus-days delinquent (those reported in the CRE Finance Council investor reporting package with a loan code status of "6") represented 22.5% (totaling $4.5 billion) of the delinquent loans in March (see chart 4).
Chart 3
Chart 4
The Special Servicing Rate Rose 24 Bps
The overall special servicing rate increased 24 bps month-over-month in March 2023, increasing to 4.8% (see chart 5). The special servicing rate increased for retail (by 32 bps to 11.2%), multifamily (by 31 bps to 1.8%), and office (by 29 bps to 4.5%) and decreased for lodging (by 6 bps to 5.8%) and industrial (by 1 bp to 0.4%) loans. Although increasing, the overall special servicing rate remains well-below the 9.5% peak in September 2020.
The largest loan to move into special servicing as of March was Gas Company Tower and World Trade Center Parking Garage. The loan is secured by a 1.4 million-sq.-ft. office property located in Los Angeles. Major tenants include Southern California Gas Company (26.3% of NRA; October 2026 expiration), Sidley Austin (9.9%; October 2026), and Deloitte (8.1%; January 2031). The loan, which matured on Feb. 9, 2023, was transferred to the special servicer on Feb. 10, 2023, due to maturity default, and the special servicer is currently engaging with the borrower to extend the loan. The borrower has the option to extend the loan's term for three successive one-year periods. According to the servicer, the property's debt service coverage ratio was 1.94x and occupancy was 73.0% as of third quarter 2022. The loan is now in default and was reported as a non-performing balloon loan in March.
Chart 5
DQ Rates Decreased For All Property Types Except Office
Chart 6 shows the historical DQ rate trend by property type. Although the overall March DQ rate decreased slightly, the DQ rate for office (44 bps; 149 loans; $5.0 billion) loans increased for the third consecutive month, while DQ rates decreased for retail (55 bps; 259 loans; $7.4 billion), lodging (14 bps; 161 loans; $3.9 billion), industrial (3 bps; 10 loans; $170.3 million), and multifamily (2 bps; 76 loans; $1.8 billion) loans.
There were 82 newly delinquent loans totaling $1.7 billion in March. These included 21 office loans ($789.4 million), 22 multifamily loans ($386.4 million), 17 retail loans ($288.0 million), seven lodging loans ($110.4 million), and one industrial loan ($3.5 million).
Charts 7 and 8 show the year-over-year change in the property type composition for delinquent loans. DQ property type composition rates increased year-over-year for office (to 24.9% from 13.5%), multifamily (to 8.8% from 4.1%), and industrial (to 0.9% from 0.7%) loans but decreased for retail (to 36.9% from 41.3%) and lodging (to 19.7% from 30.2%) loans.
Chart 6
Chart 7
Chart 8
Several Large Loans Moved Out Of Delinquency
The overall DQ rate decreased in March, with 61 loans totaling $2.1 billion moving out of delinquency. Table 2 shows the top five of these loans by balance.
Table 2
| Top Five Loans That Moved Out Of Delinquency In March 2023 | ||||
|---|---|---|---|---|
| Property name | City | State | Property type | Outstanding balance ($) |
| Bridgewater Commons | Bridgewater | N.J. | Retail | 300,000,000 |
| LA Lofts Portfolio | Los Angeles | Calif. | Multifamily | 225,000,000 |
| Valencia Town Center | Valencia | Calif. | Retail | 195,000,000 |
| 245 Park Ave. | New York | N.Y. | Office | 93,750,000 |
| Chesterfield Towne Center | North Chesterfield | Va. | Retail | 91,131,168 |
This report does not constitute a rating action.
| Primary Credit Analyst: | Senay Dawit, New York + 1 (212) 438 0132; senay.dawit@spglobal.com |
| Secondary Contacts: | Benjamin Ach, New York + 1 (212) 438 1986; benjamin.ach@spglobal.com |
| Tamara A Hoffman, New York + 1 (212) 438 3365; tamara.hoffman@spglobal.com | |
| Ambika Garg, Chicago + 1 (312) 233 7034; ambika.garg@spglobal.com | |
| Deegant R Pandya, New York + 1 (212) 438 1289; deegant.pandya@spglobal.com | |
| Research Contact: | James M Manzi, CFA, Washington D.C. + 1 (202) 383 2028; james.manzi@spglobal.com |
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