(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 rose 10 bps month over month to 5.3% in October.
- By balance, DQ rates increased for office (92 bps to 9.1%); decreased for multifamily (48 bps to 3.7%), retail (25 bps to 6.3%), and lodging (14 bps to 5.3%); and remained unchanged for industrial (at 0.3%).
- Special servicing rates rose for office, lodging, multifamily, and retail loans; and decreased for industrial loans.
- The share of loans that were either modified or extended decreased 25 bps month over month to 10.2%.
The Overall Delinquency Rate Rose 10 Bps
In this report, S&P Global Ratings provides its observations and analyses of the U.S. private-label commercial mortgage-backed securities (CMBS) universe, which totaled $727.2 billion as of October 2024 (a net increase of $2.46 billion month over month). The overall U.S. CMBS delinquency (DQ) rate rose 10 basis points (bps) month over month to 5.3% in October and soared 147 bps year over year (a 39.0% increase by DQ balance). By dollar amount, total delinquencies grew to $38.9 billion, representing net month-over-month and year-over-year increases of $0.9 billion and $10.9 billion, respectively (see charts 1A and 1B).
Chart 1A
Chart 1B
Several Large Loans Moved Into Delinquency
The overall DQ rate increased in October with an additional 141 loans ($4.2 billion) becoming delinquent. Table 1 shows the top five of these loans by balance.
Table 1
Top five newly delinquent loans in October 2024 | ||||
---|---|---|---|---|
Property | City | State | Property type | Delinquency balance ($) |
Worldwide Plaza | New York | New York | Office | 940,000,000 |
Times Square Plaza | New York | New York | Multiple | 335,000,000 |
State Farm Portfolio | Various | Various | Office | 250,680,883 |
The Prince Building | New York | New York | Multiple | 200,000,000 |
Clackamas Town Center | Happy Valley | Oregon | Retail | 191,396,065 |
Delinquent And Modified Or Extended Loans
Modified loans represented approximately 10.2% ($73.8 billion) of the $727.2 billion total U.S. CMBS outstanding balance as of October. Table 2 shows the top five modified loans by balance; two of which are backed by office.
By sector, lodging had the highest modification rate (19.6% by balance) as of October. However, this standout rate is more a function of the legacy modifications that were allowed soon after the onset of the COVID-19 pandemic; it is not an accurate indicator of current sector stress. Retail loans had the second-highest modification rate (14.5%), reflecting a mix of modifications granted due to the pandemic and, of more concern, for loans commonly backed by retail malls that are unable to refinance and, therefore, receive extensions. The 7.6% and 10.2% modification rates for office and multifamily, respectively, are also revealing, as they indicate that the delinquency rates for those sectors would be notably higher if CMBS servicers weren't granted modifications. Chart 2 shows the breakout of the delinquency rate and modified loan rate by property type.
Chart 2
The largest loan modified in October was Mall of America.
Table 2
Top five modified loans in October 2024 | ||||
---|---|---|---|---|
Property | City | State | Property type | Outstanding balance ($) |
Mall of America | Bloomington | Minnesota | Retail | 1,385,591,387 |
280 Park Avenue | New York | New York | Office | 1,075,000,000 |
IMC Portfolio | Various | Various | Other | 975,000,000 |
One Market Plaza | San Francisco | California | Office | 850,000,000 |
Workspace Property Trust Portfolio - Component B | Various | Various | Multiple | 850,000,000 |
The Special Servicing Rate Increased By 28 Bps
The overall special servicing rate increased 28 bps month over month to 8.0% in October (see charts 3A and 3B). By sector, the special servicing rate rose for office (129 bps to 13.5%), lodging (39 bps to 7.1%), multifamily (15 bps to 4.9%), retail (9 bps to 10.7%), and decreased for industrial loans (9 bps to 0.3%). The overall special servicing rate remains below the 9.5% peak of September 2020.
The largest loan to move into special servicing in October was Worldwide Plaza. The loan is secured by a 2.0 million-sq.-ft. borrower's fee simple interest in an office building and a pledge of membership interests, with a collateral assignment of certain mortgages on the property's amenities parcel. As of June 2024, occupancy at the property was 90.0% and the NCF DSC was 2.23x. The $940.0 million loan has an original term of 120 months, and it is scheduled to mature in November 2027.
The loan transferred to the special servicer on Sept. 12, 2024, due to imminent monetary default; and, as of Oct. 16, 2024, the borrower is waiting for special servicer to provide the reporting files.
Chart 3A
Chart 3B
DQ Rates Decreased For Four Sectors
By balance, the overall DQ rate increased for office (92 bps to 9.1%; 361 loans; $15.9 billion); and decreased for retail (25 bps to 6.3%; 270 loans; $7.6 billion), multifamily loans (48 bps to 3.7%; 194 loans; $5.0 billion), and lodging (14 bps to 5.3%; 135 loans; $5.4 billion); and remained unchanged for industrial loans (at 0.3%; 13 loans; $0.2 billion). Charts 4A and 4B show the historical DQ rate trend by property type.
There were 141 newly delinquent loans totaling $4.2 billion in October, led by office (40 loans; $2.0 billion), multifamily (37 loans; $656.3 million), retail (28 loans; $577.0 million), lodging (14 loans; $135.4 million), and industrial loans (four loans; $90.0 million).
By property type, DQ composition rates increased year over year for office (to 40.90% from 35.57%) and multifamily (to 12.74% from 8.68%) loans; and decreased for retail (to 19.53% from 25.81%), lodging (to 13.84% from 15.21%) loans, and industrial (to 0.49% from 3.88%) loans. Charts 5A and 5B show the year-over-year change in the property type composition for delinquent loans.
Chart 4A
Chart 4B
Chart 5A
Chart 5B
Table 3
Top five loans that moved out of delinquency in October 2024 | ||||
---|---|---|---|---|
Property | City | State | Property type | Outstanding balance ($) |
Bank of America Plaza | Los Angeles | California | Office | 266,670,000 |
Providence Place Mall | Providence | Rhode Island | Retail | 254,930,762 |
Westfield MainPlace | Santa Ana | California | Retail | 140,000,000 |
Sunvalley Shopping Center | Concord | California | Retail | 139,001,144 |
The Centre | Cliffside Park | New Jersey | Multifamily | 130,000,000 |
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: | Mei Yolles, New York 121 243 80307; mei.yolles@spglobal.com |
Tamara A Hoffman, New York + 1 (212) 438 3365; tamara.hoffman@spglobal.com | |
Lourdes Karam, Chicago +1-312-233-7022; Lourdes.Karam@spglobal.com | |
Research Contact: | James M Manzi, CFA, Washington D.C. + 1 (202) 383 2028; james.manzi@spglobal.com |
No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.