Delinquency rates for mortgages backed by commercial properties increased during the fourth quarter of 2024, according to the Mortgage Bankers Association’s (MBA) latest commercial real estate finance Loan Performance Survey. The share of loans that were delinquent increased for some property types, particularly office, lodging, retail and multifamily, but decreased for industrial properties.

Among capital sources, CMBS saw the highest loan delinquency rates at 5.3%. At the other end of the spectrum, loans from Fannie Mae and Freddie Mac saw a 0.6% delinquency rate.

“The delinquency rate for commercial mortgages increased during the final three months of 2024, with increases across most capital sources and property types,” said Mike Fratantoni, MBA’s SVP and chief economist. “The challenges facing different sectors vary – with office properties perhaps facing the most challenging combination of weaker fundamentals and stubbornly high interest rates. However, despite the current conditions, other property types continue to benefit from a relatively strong economy.”

Entre Commercial Realty is pleased to announce that it has recently completed a long term 25,000 square foot lease at 175 Prairie Lake Road in East Dundee, Illinois.

The modern 45,000-square-foot facility was built in 2021 and comes equipped with four docks, four drive-in doors, floor drains, a new office buildout, and a fully air-conditioned warehouse. Entre capitalized on the lack of quality products currently available in this size range and procured a tenant from a neighboring business park for their expansion needs.

Mike DeSerto, Cory Kay, and Elisabeth Lazzara from Entre Commercial Realty represented the landlord, and John Greene Commercial represented the tenant in this transaction. Entre Commercial Realty is a full-service industrial/commercial real estate firm based in suburban Chicago, Illinois.

Commercial mortgage delinquencies increased in the third quarter of 2024, according to the Mortgage Bankers Association’s (MBA) latest Commercial Delinquency Report. All lender types saw delinquencies rise during the quarter. 

Based on the unpaid principal balance (UPB) of loans, delinquency rates for each group at the end of Q3 were as follows: 

• Banks and thrifts (90 or more days delinquent or in non-accrual): 1.24%, an increase of 0.09 percentage points from Q2 2024; 

• Life company portfolios (60 or more days delinquent): 0.46%, up 0.03 percentage points from Q2; 

• Fannie Mae (60 or more days delinquent): 0.56%, up 0.12 percentage points from Q2; 

• Freddie Mac (60 or more days delinquent): 0.39%, up 0.01 percentage points from Q2; and 

• CMBS (30 or more days delinquent or in REO): 5.15%, up 0.33 percentage points from Q2. 

“The share of the balance of delinquent commercial mortgages increased for every major capital source during the third quarter of 2024,” said Jamie Woodwell, MBA’s head of commercial real estate research. “The increases varied by capital source and were driven by the particularities of each individual loan and property. Stresses differ by property type and subtype, geographic market and submarket, loan type and vintage, borrower type and more.” 

A recent survey of commercial real estate investors ranked Nashville as a top 10 target among U.S. metros. Nashville ranks #5 in CBRE’s 2023 U.S. Investor Intentions Survey.

The survey found that more investors are prioritizing high-performing secondary markets in 2023, particularly those with strong job and population growth prospects. This can translate into greater potential for equity and income growth. Sun Belt markets are the most appealing: Dallas is the top preferred market, followed by Austin.

“Over the last decade, Nashville has been one of the strongest apartment markets in the country,” said CBRE’s Brett Carr. “Tennessee continues to attract world-class businesses to the state, many of which are establishing a presence in the Nashville metro area. As a result, job and population growth continue to outpace our peer markets and stand as the driving forces in Nashville’s success.”

Entre Commercial Realty closed the sale of 1450 Feehanville Drive, a 112,290-square-foot facility on 5.6 acres of land in Mount Prospect’s Kensington Business Center. The property features 24’ ceilings and is located in the northern O’Hare industrial submarket.

Entre’s Dan Benassi, SIOR, Dan Jones, SIOR and Sam Deihs represented the purchaser, a joint venture affiliates of Nicholas & Associates and Parenti & Raffaelli, who jointly intend to occupy a portion of the facility, and the remainder will be leased to third-party tenants. CBRE’s Mike Sedjo and Jack Brennan represented the seller in the transaction.

Nicholas & Associates is a full-service construction management and development company specializing in public projects, multifamily and mixed-use developments primarily in Illinois, Wisconsin and Florida. Parenti & Raffaelli is a custom woodworking company specializing in custom-finished millwork.

Extensive renovations are planned to convert the property into a multi-tenant facility, including a new entrance façade, office area and truck docks. Additional improvements include new landscaping, lighting, and parking.

When baby boomers came of age, they brought multiple changes to the workforce, entertainment and society. According to a recent video from Marcus & Millichap, this age cohort, born between 1946 and 1964, exerts as much influence as it ages and retires.

Marcus & Millichap’s John Chang divided the video presentation “How Aging Baby Boomers Could Impact CRE” into two parts.

The Workforce and Brain Drain

Chang, Marcus & Millichap’s senior vice president, national director, research and advisory services, said that 11,000 baby boomers will retire each day, this year. Here’s what this means for employers:

• This cohort is carrying what Chang classified as “unique information” and “unique skills” out the door

• This is forcing employers to shift and adapt as they face the “brain drain” resulting from retiring boomers

Chang said he recently spoke with a group of developers who were discussing the loss of key construction personnel who plan to retire in the next couple of years.

“The leaders of these construction firms have become very reliant on a core group of very experienced tradespeople,” Chang noted. “In general, the U.S. doesn’t have a deep bench of workers with these very important skills.”

The numbers bear this out. The Bureau of Labor Statistics indexed boomers’ role in various career types, noting their impact in areas like financial services, manufacturing, education, and health services. This is in addition to CRE-specific services, like construction, plumbing and electrical work.

Baby Boomers and CRE Considerations

Meanwhile, on the real estate side, Chang said that baby boomers are more reliant on healthcare services, with people over the age of 75 visiting their doctors 6.4 times per year, on average.

“Think about this for a minute,” Chang said. Over the next five years, an estimated 15.5 million people will turn 76 in the U.S., and the total population aged between 65 and 75 will grow by 6 million. That’s a lot more doctor visits.”

This, in turn, means more demand for medical office space over the next five years. But even as the baby boom generation drives demand for this space, Chang noted that the “pace of development has been relatively slow in recent years.”

Demand for senior living options is also anticipated to increase as baby boomers age. Chang pointed out that the average occupancy rate of assisted living facilities in the United States is 84%, a figure “that has increased for nine quarters straight.” However, Chang added, the pace of assisted living development has declined due to construction cost increases and significant labor shortages.

As part of the city’s efforts to eliminate “blight” and improve communities, the Detroit Construction & Demolition Department has demolished its 100th commercial property since January 2023. The long-vacant Charles Hanneman Elementary School located at 6420 McGraw, was the ceremonious 100th site.

The milestone marks progress in setting the stage for revitalization as Detroit aggressively tackles decaying buildings across the city’s landscape. Charles Hanneman was built in 1916 and was an active school for more than 90 years before it shuttered in 2007 due to financial issues.

“We look forward to seeing what this actual site will bring to the community,” said Eva Torres with the Detroit Department of Neighborhoods. Detroit has a list of hundreds of abandoned buildings slated for demolition. “The commercial properties range in categories and types – we do have a significant amount of schools on that list,” said Lajuan Counts from the Detroit Construction & Demolition Department.

Connect Industrial Midwest 2024 will take place on March 5, 2024, at Joe’s Live in Rosemont, Illinois. Click here for more information and to register.