Office Distress Rate Climbs 70 Basis Points to 15.5% in November
The CRED iQ research team evaluated payment statuses reported for each loan securitized by CMBS financing along with special servicing status as part of our monthly distress update. The office sector reached a new high in November as it jumped 70 basis points (bps) to 15.5 percent.
The overall CRED iQ distress rate added 5 bps and crossed into double digits for the first time this year at 10 percent. On a positive note, four of the six major property types that CRED iQ tracks saw decreases in distress in November.
The November print represents the third consecutive record high for the index. CRED iQ’s specially serviced rate added 4 bps to 9.1 percent. The CRED iQ delinquency rate rose to 7.7 percent from 7.2 percent measured in October.
After taking a breather in October, the office segment distress rate continued to climb, adding 70 bps to 15.5 percent, a new high. Office remains at the top of all property sectors with respect to distress rates.
Retail continues its position in the No. 2 slot, with an 11.5 percent distress rate, shaving 2 bps in November.
Right behind retail, multifamily has an 11.2 percent distress rate, adding 2 bps from the October data. Multifamily has experienced the sharpest distress increase of all property types in 2024. The January 2024 multifamily distress rate was 2.6 percent, yielding a stunning 842 basis point increase in the distress rate over the course of 2024.
The hotel segment distress rate decreased by 4 bps — right back to the September distress rate of 8.6 percent, and maintained a secure, if not a bit distant, fourth place on the distress league tables.
Self-storage (1.7 percent, down from 3.6 percent in October) and industrial (0.6 percent, down from 1.2 percent in October) round out fifth and sixth places, respectively.
Looking at the distressed loan payment status, just 14.2 percent of the loans are current, a steep 400-point drop. Additionally, 2.7 percent of loans are attributed to late (but within the grace period) and 5.2 percent of loans were late (but less than 30 days delinquent). When we combine these three metrics, 22.1 percent of all loans were current, or late within the grace period, or less than 30 days delinquent — a reduction of 250 bps from last month (adding to the 100 basis point reduction in our previous print).
The nonperforming matured category increased from 39.9 percent to 41.9 percent. Meanwhile, performing matured inched up from 16.7 percent in our October report to 16.9 percent. The 90-plus days delinquent category shaved 3 bps in November to 12.7 percent.
Analysis methodology
It’s important to note that CRED iQ’s distress rate factors in all CMBS properties that are securitized in conduits and single-borrower large loan deal types. CRED iQ tracks Freddie Mac, Fannie Mae, Ginnie Mae and CRE collateralized loan obligation metrics in separate analyses.
CRED iQ’s distress rate aggregates the two indicators of distress – delinquency rate and specially serviced rate – yielding the distress rate. The index includes any loan with a payment status of 30-plus days delinquent or worse, any loan actively with the special servicer, and includes nonperforming and performing loans that have failed to pay off at maturity.
Mike Haas is the founder and CEO of CRED iQ
