Fitch Ratings’ overall U.S. CMBS delinquency rate climbed 22 basis points to close 2024 at 2.98%, up from 2.76% in November and 2.31% a year ago. The increase was fueled by a surge in office delinquencies and reduced resolution volume.

Five large office loans with a balance greater than $60 million became newly delinquent in December, totaling $1.03 billion and accounting for 50% of overall new delinquencies and 81% of new office delinquencies. These were largely responsible for a 92-bp increase in office CMBS delinquencies, which ended 2024 at 7.18%.

New 60+ day delinquency volume increased to $2.08 billion in December 2024 from $1.76 billion in November, driven mainly by several larger balance office loans. Office loans accounted for the largest share of new delinquencies (61%, $1.27 billion) followed by retail (15%, $309 million), mixed use (12%, $258 million) and multifamily (5%, $92 million). Term defaults accounted for 51% ($1.06 billion) of new delinquencies, while maturity defaults represented 49% ($1.02 billion).

Resolution volume decreased to $586 million in December from $1.48 billion in November, below the year’s monthly average of $1.05 billion.

Pictured: Worldwide Plaza in New York City, which backs one of five newly delinquent large office loans.

Large-scale loans helped drive significant credit changes in newly delinquent loans, cured loans and modified loans during July, Trepp reported. For example, the office CMBS delinquency rate rose 54 basis points last month to 8.09%, with a single loan–the $670-million securitization on 230 Park Ave. in Midtown Manhattan–representing about one-third of new delinquencies in the sector.

In the multifamily sector, several large loans also became delinquent or reverted to delinquency during July, according to Trepp. One of these was the $221-million MFP portfolio, which became nonperforming last November, returned to performing status in April and then flipped back last month. Multifamily delinquencies rose 27 bps to 2.63% as July ended.

Conversely, the $124.2-million Gansevoort Park Avenue loan backed by a Manhattan lodging property was sent to the special servicer in June for imminent monetary default but then turned back to performing matured balloon in July, taking the loan out of the pool of delinquent CMBS deals. This helped drive a 15-bp decrease in hotel delinquencies to 6.17%. Retail delinquencies also declined in July, dropping by 28 bps to 6.14%.

Office and retail CMBS loan defaults drove the overall default rate higher in 2023, Fitch Ratings said Tuesday. The total annual and cumulative U.S. CMBS loan default rates for 2023 increased to 0.9% and 18.5%, respectively, from 0.3% and 17.9% in 2022, due to increased maturity and term defaults primarily in office and retail, which continued to comprise the largest shares of overall default volume. Reduced CMBS issuance was also a factor.

Office default volume increased the most in 2023, to $4.8 billion (55.9% of 2023 default volume) from $1.6 billion (49.4%) in 2022. Most of the office defaults were at maturity in 2023 (60.4%; $2.9 billion), generally in line with 2022 (69.5%, $1.1 billion). Retail default volume in 2023 also increased to $2.55 billion (29.7%) from $1.1 billion (34.3%) in 2022, driven by a high concentration of regional mall defaults.

Although the office and retail sectors experienced substantially more defaults in 2023, the increases in the hotel, industrial and multifamily sectors were more modest, Fitch said. The three sectors combined accounted for less than 10% of overall defaults in 2023, down from 15% in 2022.

Pictured: The Gas Company Tower in Downtown Los Angeles. A Brookfield fund defaulted on $465 million of debt tied to the property in 2023.