There are a host of challenges facing different sectors
Delinquency rates for mortgages backed by commercial properties rose in the fourth quarter of 2024, with most property types experiencing an uptick, according to the Mortgage Bankers Association’s (MBA) latest Commercial Real Estate Finance (CREF) Loan Performance Survey.
“The delinquency rate for commercial mortgages increased during the final three months of 2024, with increases across most capital sources and property types,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “The challenges facing different sectors vary – with office properties perhaps facing the most challenging combination of weaker fundamentals and stubbornly high interest rates. However, despite the current conditions, other property types continue to benefit from a relatively strong economy.”
Rising delinquencies
The survey found that the share of loans not current increased slightly overall, but the impact varied by property type and capital source.
- Office, lodging, retail, and multifamily properties saw rising delinquency rates.
- Industrial properties were the exception, with delinquency rates improving.
- Commercial mortgage-backed securities (CMBS) loans had the highest delinquency levels, with 5.3% of CMBS loan balances 30 days or more delinquent, up from 4.8% in the previous quarter.
- Government-sponsored enterprise (GSE) loan delinquencies increased from 0.5% to 0.6%.
- Federal Housing Administration (FHA) multifamily and health care loan delinquencies rose from 0.87% to 1.0%.
- Life insurance company loans showed slight improvement, with delinquencies dropping from 0.94% to 0.86%.
The report attributes the rising delinquency rates to a combination of economic pressures, high interest rates, and sector-specific challenges. The office sector remains the most affected due to shifting demand for workspace and elevated borrowing costs, while lodging and retail continue to adjust to evolving consumer behaviors.
MBA’s survey collected data on $2.5 trillion of commercial and multifamily mortgage loans, representing 52% of the total $4.7 trillion in outstanding commercial and multifamily mortgage debt. The results build on similar reports conducted since April 2020.
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