US CMBS market still more vibrant than its European counterpart
The commercial mortgage-backed securities (CMBS) delinquency rate published by New York City-based Trepp LLC reached another new low for the post-Great Recession era.
The February reading for the CMBS delinquency rate was 2.04%, a decline of 10 basis points from January. The rate peaked at 10.34% in July 2017, but its current descent began when it totaled 5.75% in June 2017 and continued to fall in 27 of the subsequent 32 months.
During February, the volume of CMBS loans that were more than 30-days delinquent dropped by 3.5% from January to $10.04 billion. The Trepp data report noted that this could have been the sole reason for the delinquency rate’s latest tumble, but added that “it actually declined by nearly 5% to 2.04% because the size of the CMBS universe increased slightly, to $489.2 billion from $487.51 billion.”
Year-to-date the overall US CMBS delinquency rate is down 30 basis points. The percentage of loans that were seriously delinquent in February – defined as 60-plus days delinquent, in foreclosure, REO or non-performing balloons – was 1.95%, down nine basis points for the month.
Both legacy loans and CMBS 2.0 loans – those securitized since the Great Financial Crisis – recorded declines in their delinquency volumes last month. Trepp reported the legacy sector recorded $5.91 billion of delinquent loans, or 40.19 percent of a $14.7 billion total, while the CMBS 2.0 sector had $4.13 billion of delinquent loans, or 0.87 percent of the $474.52 billion universe.
Within the different sectors of the commercial property world, the industrial delinquency rate fell 12 basis points to 1.45%, the multifamily delinquency rate dropped 23 basis points to 1.79%, the office delinquency rate tumbled by 15 basis points to 1.72% and the retail delinquency rate dipped 14 basis points to 3.62%. The only increase in the delinquency rate occurred in the lodging sector, which recorded an increase of 11 basis points to 1.60%.
Separately, Trepp issued a data analysis that offered a declaration of optimism on the European CMBS activity.
“Overall, the combined UK and European market issuance levels were unchanged between 2018 and 2019 with 13 new deals coming to market. In terms of volume, the market saw a 20% decrease in Euro deals,” Trepp stated. “That was offset by a 35% jump in UK deals – leaving total volume of new issuance about even year-over-year.”
However, Trepp also pointed out that the European CMBS market “has been much more halting than the US CMBS market” in the years since the Great Recession.
“The European market generated €2.3 billion of new issuance in 2019, down from 2018’s total of €2.9 billion,” Trepp added. “That is the second best total since 2013, but represents about 7% of the peak issuance volume from 2006. In the UK, new issuance total of £1.6 billion last year, up from £1.2 billion in new pricings in 2018. That is the highest figure since 2015 and represents about 9% of the peak issuance total. These totals indicate the market still has ample room to grow. The reemergence of the European CMBS market continues to be almost centered exclusively on the core countries that contributed to CMBS 1.0: the UK, Germany, France, the Netherlands, Italy, and Finland.”
