Office CMBS Delinquency Rate Spikes to 10.4%, Just Below Worst of Financial Crisis Meltdown. Fastest 2-Year Spike Ever

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2024-12-01 02:00:05

The delinquency rate of office mortgages that have been securitized into commercial mortgage-backed securities (CMBS) spiked by a full percentage point in November for the second month in a row, to 10.4%, now just a hair below the worst months during the Financial Crisis meltdown, when office CMBS delinquency rates peaked at 10.7%, according to data by Trepp, which tracks and analyzes CMBS.

Over the past two years, the delinquency rate for office CMBS has spiked by 8.8 percentage points, far faster than even the worst two-year period during the Financial Crisis (+6.3 percentage points in the two years through November 2010).

The office sector of commercial real estate has entered a depression, and despite pronouncements earlier this year by big CRE players that office has hit bottom, we get another wakeup call:

Amid historic vacancy rates in office buildings across the country, more and more landlords have stopped making interest payments on their mortgages because they don’t collect enough in rents to pay interest and other costs, and they can’t refinance maturing loans because the building doesn’t generate enough in rents to cover interest and other costs, and they cannot get out from under it because prices of older office towers collapsed by 50%, 60%, 70%, or more, and with some office towers becoming worthless and the property going for just land value.