Editor’s Note: This trend will continue as long as we are in a recession in the U.S. and the demand for commercial and retail space is down. Businesses have been reducing costs and reducing the amount of commercial space they lease is part of that program.
News (Reuters):
A rally in commercial mortgage-backed securities eased on Friday as delinquencies on loans in the bonds accelerated, according to investors and Trepp, LLC.
Office, retail and multifamily building loans that are at least 30 days past due rose 0.48 percentage point to 2.45 percent last month, to levels nearly five times that of a year ago, Trepp, which collects data on the $700 billion market, said in a report on Friday.
Monthly reports to investors on loans backing CMBS also showed credit in April posted its largest monthly deterioration to date, according to Barclays Capital.
Commercial real estate is following the slump in residential property as the U.S. recession reduces land values and the revenue needed to pay debt. Delinquencies could rise to 4 percent this year and 8 percent in 2010 amid lower cash flows and a lack of funding, according to Citigroup Inc.
Despite rising delinquencies, CMBS risk premiums have dropped 2 percentage points over the past several weeks on expectations that a federal lending program will provide cash for investors willing to buy the bonds, helping reduce interest rates to levels that encourage fresh lending.
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