Four commercial property sectors saw monthly fluctuations in their CMBS delinquency rates of 40 basis points or more in December 2024, Trepp reported this week. Lodging delinquencies declined 78 bps to 6.14%, but the other three property types saw increases in December.

Retail delinquencies rose the most, climbing 86 bps to 7.43%. The office delinquency rate increased by 63 bps to an all-time high of 11.01%, while the multifamily rate grew by 40 bps to 4.58%. Industrial delinquencies dropped three bps to 0.29%.

The largest new retail delinquency in December was the $505-million loan on Natick Mall, a 1,039,965- square-foot superregional mall in the Boston suburb of Natick, MA. “Updated special servicer commentary highlights that the borrower believes the mall is not financeable at this time due to debt service and debt yield levels being below market, co-tenancy concerns and the status of the anchor boxes,” according to Trepp.

In office, the largest new delinquency was the $670-million 230 Park Ave. loan, backed by the Helmsley Building in Midtown Manhattan (pictured). Trepp noted that the loan had toggled between performing and nonperforming matured balloon throughout 2024 and was performing from July to November, but December commentary revealed that the special servicer commenced a foreclosure action.

The Trepp CMBS Special Servicing Rate rose 33 basis points to 8.79% in September. This was the ninth consecutive monthly increase and the second-largest uptick of 2024, the firm reported.

Distress was consistent throughout, with the respective special servicing rates of the five major property types all increasing. Although these increases varied in degree, four of the five property types increased by at least 30 bps. Driving the overall September increase was office, which surged 67 bps to 12.58%.

The office rate is now up more than 200 bps over the past four months alone, with distress continuing to mount. More than half the September dollar amount of new transfers to special servicing occurred in the sector, according to Trepp.

The multifamily rate rose 36 bps to 6.07%, surpassing the 6% mark for the first time in nearly nine years. Furthermore, the retail rate reached a near two-year high of 11.22%, and the lodging rate hit a two-year high of 7.84%. Even with an 11-bp increase in September, though, industrial CMBS in special servicing still comes in below 1%.

The distress rate on apartment loans with CMBS financing has increased 185% year to date, according to CRED iQ. Loans in the multifamily sector began 2024 with a 2.6% distress rate—a composite of the special servicing and delinquency rates—and now stand at 7.4%.  

Although the monthly increase between May and June was a modest three basis points, apartment loans are now vying with those in lodging sector for third place, CRED iQ reported. 

The retail and office sectors are nearly neck-and-neck for the highest distress rates, notching 11.7% and 11.5%, respectively. Both sectors saw modest increases of four bps compared to the previous month.  

Hotels retained third place with an 8.1% distress rate, after logging the best month-over-month improvement of the group, with a 130-bp decline in distress. Industrial and self-storage continued operating at sub-1% in all but one of the past 7 months.    

The overall CRED iQ distress rate added 13 bps in June to 8.62%, nearly identical to May’s increase. The June rate a fourth straight record high. CRED iQ’s special servicing rate remained mostly flat at 8.08% while the CRED iQ delinquency rate gained 48 basis points to 6.28%. 

The Trepp CMBS Special Servicing Rate ticked up slightly in June, rising two basis points to 8.23%. Although the monthly increase was minimal, Trepp noted that it represents the sixth consecutive monthly increase. Prior to the COVID-19 pandemic, the last time the rate eclipsed this month’s 8.23% was January 2014, according to Trepp.

A few property types experienced more than modest change for good or bad in June. Mixed-use special servicing rose the most, up 40 bps in June to 9.34%. This is the first time the mixed-use rate has eclipsed 9.00% since July 2013. The office rate also rose in June, increasing 27 bps to 10.79% after its first decline of the year in May.

Two property types that saw material improvement were lodging and multifamily, with drops of 54 and 26 bps, respectively. Although the multifamily rate experienced some relief, it remains relatively high, still sitting above 5.00%. Retail continues to hold the highest special servicing rate at 10.82%, while at the other end of the spectrum sits industrial at 0.33%.

Landmark Properties acquired Pointe on Rio in Austin, near the campus of the University of Texas. Pointe on Rio, soon to be rebranded as Tradition on Rio, is Landmark’s seventh asset in the Austin market; the acquisition adds 321 beds and 122 units to the company’s portfolio. 

Built in 2014, this mid-rise community at 1901 Rio Grande Street boasts a nearly 94% preleasing rate for the Fall 2024 term. It has a diverse range of apartment layouts, spanning from studio to five-bedroom floorplans. 

Pointe on Rio offers students a number of amenities, such as a courtyard pool, resident lounge with gaming area, pool table and TVs, on-site parking, fitness center, conference/study room, and numerous resident events throughout the year.

Landmark’s presence in Austin is bolstered by a portfolio totaling 3,769 beds across renowned communities including Legacy on Rio, The Mark Austin, The Standard at Austin, The Nine at Rio, The Nine at West Campus, and Moontower.

The distressed loan rate among commercial real estate (CRE) collateralized loan obligations (CLO) originated prior to 2023 rose nearly 400% year-over-year from the end of 2022, Kroll Bond Rating Agency (KBRA) reported. The distress rate ended 2023 at 5.4%, compared to 1.4% at year-end 2022.

Meanwhile, KBRA reported the rate of loan modifications is up more than 100% for the same period, to 16.7%. The loan modification rate was 7.9% as 2022 ended.

Multifamily, representing 69.9% of the aggregate outstanding loan balance, performed better than average, with a distress rate of 4.3% and modification rate of 12.7%. At the other end of the spectrum, office, with the second-highest concentration at about 13.3% of the loan balance, had a distress rate of 12.3% and a modification rate of 35.4% at the end of 2023.

“The worsening CRE CLO loan performance has been influenced by higher interest rates and challenged business plans, especially among multifamily and office properties that make up over 80% of the outstanding loans,” KBRA reported.

Multifamily has experienced slowing or negative rent growth and higher operating and insurance costs, while the office sector continues to face secular demand shifts, contributing to weak leasing activity. “This has led to a number of deals in recent months not meeting their interest coverage and overcollateralization note protection tests as loans became delinquent,” according to KBRA.