What the numbers say: The overall delinquency rate increased by 53 basis points last month, the most significant increase since June 2020. This was driven by a 125 basis points jump in office delinquencies. The office rate now stands at 4.02%, a rate that was last seen in 2018. Many companies are aggressively trying to reduce space, and office space available for sublease is near record highs in many markets. Relevance: The founder of Polpo Capital Management, Dan McNamara, told Bloomberg that this is just the tip of the iceberg, as around $35B in CMBS office loans are scheduled to mature this year. Brookfield has already fallen behind on mortgage payments for large office spaces this year. According to Bloomberg, existing debt that rebundles a variety of commercial real estate loans is currently generating yields of over 5.5% in the secondary markets, one of the highest levels in over ten years. |
What happened: According to a recent report by Trepp, in May, the overall CMBS delinquency rate was at 3.62%, the highest since March 2022. The report pointed to higher rates and poor office demand as reasons for the substantially higher delinquency levels.