Dive Brief:

• Multifamily commercial-mortgage-backed securities delinquencies jumped 36 basis points to 2.17% in December — the largest increase among all commercial real estate sectors, according to data and analytics firm Trepp.
• The increase in retail delinquencies was slightly behind multifamily, climbing 34 basis points to 6.97%. Industrial delinquencies rose one basis point to 0.42%. Delinquencies for lodging (dropping 24 basis points to 4.40%) and office (declining 12 basis points to 1.58%) both fell in December.
• The overall delinquency rate for CMBS topped the 3% mark for the first time since July 2022 as it rose five basis points from November to 3.04%, according to Trepp. After falling to a post-COVID-19 low of 2.92% in September 2022, the rate increased in October, November and December.

Dive Insight:

In its December report, Trepp noted many analysts and investors are expecting delinquencies to rise in 2023. Loans that are maturing this year could help drive that jump.

“With interest rates considerably higher than a year ago and with uncertainty for the U.S. economy in 2023, many maturing loans could face challenges getting refinanced,” Trepp said in the report.

Trepp specifically pointed to issues with the office sector. But even owners in multifamily with maturing loans, regardless of the source of debt, could face problems.

Jon Siegel, co-founder and chief investment officer at Bethesda, Maryland-based apartment owner RailField Partners, said that his firm had seen some deals from owners who are facing challenges refinancing.

“They have a variable-rate loan,” Siegel said. “They had to put up a reserve and the rates went up so much.”

Apartment owners that financed their properties with floating-rate debt are facing pressure to sell as the loans are coming due in the near future, said Bobby Lee, CEO of Los Angeles–based apartment owner JRK

“I certainly think anybody who has floating-rate debt, whether it's a construction loan or agency debt, is going to face problems,” Lee said. “Their interest rate is going from 2.5% or 3% to 6.5% or 7%.”

But the situation shouldn’t be as bad as it was during the Great Recession. “I don't think it's 2008 or something like that,” Siegel said.

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