Finance  ·  CMBS

43% Decline in Valuations for Distressed Properties So Far in 2024

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As we passed the halfway point in 2024, CRED iQ analyzed properties that were reappraised this year and in 2023. Each of these properties were either delinquent or with the special servicer and received updated appraisals in 2023 or 2024. 

In total, the average decline in value compared to the original valuation at issuance was minus 43 percent, an increase of 140 basis points over our 2023 fourth-quarter data. 

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Our analysis looked at 2024 year-to-date performance and then created rankings for both 2023 and 2024 combined.  The combined view offers an important dimension as many key properties in 2024 were last appraised in 2023.

The top three largest overall declines, not surprisingly, were in the office sector, which also saw the largest single property valuation dip. Within our sample data, 2024 office property declines averaged 53 percent.  

The retail sector was not far behind office, notching an average valuation decline of 52 percent, along with the fourth largest single asset reduction across all property types The hotel sector saw a 40 percent average valuation reduction.

The average multifamily valuation decline remained mostly flat at 35 percent compared to our 2023 fourth-quarter analysis. The industrial asset class improved from a 32 percent decline to 10 percent in the current data. 

Looking across the top 10 declining assets for both 2023 and 2024, six are office properties, two are in the retail sector and two are classified as “other.” Half of the top 10 declining properties are in New York City and two are in California (one each in Los Angeles and San Francisco). The Midwest featured two properties in the top 10 biggest valuation drops in Chicago and Minneapolis.

With a touch of irony, we note that the same address digits for the No. 1 overall asset decliner, 1740 Broadway, appear with newcomer 1407 Broadway which came in at sixth in the combined analysis.

We see a number of familiar names on the top 10 list for properties appraised in 2024, including No. 1 entry the Gas Company Tower — an office property in Los Angeles — and 229 West 43rd Street, a retail condo asset in New York that comes in at third. Just like the combined list, five of the top 10 properties are in the office sector, followed by three in retail and two in the “other” category.  

Mike Haas is the founder and CEO of CRED iQ.