However, underlying challenges persisted as the commercial real estate market adjusts to changing economic conditions.
“The delinquency rate for most property types declined last quarter, with the exception of loans backed by office properties, which experienced an increase,” said Jamie Woodwell, MBA’s head of commercial real estate research. “Even so, the pace of increase in the delinquency rate for office property loans appears to have slowed in recent quarters.”
Read more: Which commercial asset classes are flourishing in 2024?
Office properties saw an increase in delinquencies, with 7.1% of loan balances 30 days or more delinquent, up from 6.8% the previous quarter. Other property types experienced decreases:
- Lodging loans: 5.8% delinquent, down from 6.3%
- Retail balances: 4.5% delinquent, down from 4.7%
- Multifamily balances: 1.1% delinquent, down from 1.2%
- Industrial property loans: 0.8% delinquent, down from 1.2%
“Commercial properties are working through changes in interest rates, property values, and the fundamentals of some properties,” Woodwell explained. “Each property and loan faces a unique mix of conditions depending on that property’s type and subtype, market and submarket, owner, vintage, deal terms and more. As more loans mature throughout the year, more properties will be adjusting to these new conditions.”
