Data from Trepp shows the delinquency rate of office mortgages that have been bundled into commercial mortgage-backed securities hit 11.7% in August, which is the highest level ever, according to Wolf Street. It even exceeded the 10.7% peak rate of the 2008 financial crisis.
In December 2022, the office commercial mortgage-backed securities delinquency rate was 1.6%. Wolf Street attributed the dramatic increase to high vacancies in new office towers, which allowed companies to move from an old tower to a new tower, leaving the older towers in trouble.
The delinquency rate for multifamily commercial mortgage-backed securities, backed by rental apartment property mortgages, increased to 6.9%, which is the worst rate since December 2015; two years ago, the multifamily delinquency rate was 1.8%. Multifamily has become the second worst category of commercial real estate after office commercial mortgage-backed securities. The lodging delinquency rate is 6.5%; retail delinquency rate is 6.4%; and the delinquency rate for industrial properties remains low at 0.6%.
Banks hold a portion of office mortgages, but a large portion is spread across investors and collateralized loan obligations held by bond funds, insurers, private or publicly traded office real estate investment trusts and mortgage real estate investment trusts.
More than half of multifamily debt is held or guaranteed by the U.S. government and state and local governments, which means taxpayers are responsible for that portion. Banks and thrifts are responsible for 29% of multifamily debt; life insurers for 12%; and private label commercial mortgage-backed securities, collateralized debt obligations and other Asset Backed Securities for about 3%.
