CRED iQ was happy to contribute data and analysis to last week’s insightful article in Commercial Observer by @AndrewCoen discussing the impacts of remote working on CMBS debt, and, in particular, loans secured by office properties. CRED iQ provided delinquency rates and special servicing rates for loans secured by office properties for primary markets across the U.S. Additionally, we offered guidance on identifying potential credit risks within the office sector as well as insights into the remote working dynamic. For those our followers that missed the story, below is a link to the article.
The COVID-19 pandemic has thus far not caused any material distress to CMBS office debt. Only 2.89 percent is in either delinquency or special servicing compared to 1.9 percent in 2019, according to data from commercial real estate data firm CRED iQ. Markets with the highest delinquency/special servicing rates including Hartford, Conn. (22.3 percent), St. Louis (19.2 percent), Houston (13.9 percent) and Indianapolis (13.62 percent).”
Marc McDevitt, senior managing director at CRED iQ, noted that delinquency and special servicing rates historically don’t provide guidance for future levels of distress. Lease rollover risk and market vacancy trends are instead better indicators of credit risks. McDevitt said many of the increased vacancies are tied to flight to quality with firms seeking office space with “higher wellness attributes” along with downsizing as companies reevaluate spacing needs amid the evolution of remote working habits.
“The office environment is a concern for CMBS investors in the long term as they monitor the rise in market vacancy rates, especially in [central business district] submarkets,” McDevitt said. “However, corresponding increases in delinquency will likely be delayed due to longer lease terms relative to retail. In the near-to-medium term, investors are likely concerned about pockets of lease rollover for certain assets in specific markets.
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About CRED iQ
CRED iQ is a commercial real estate data, analytics, and valuation platform providing actionable intelligence to CRE and capital markets investors. Subscribers to CRED iQ use the platform to identify valuable leads for leasing, lending, refinancing, distressed debt, and acquisition opportunities. Our data platform is powered by over $2.0 trillion of CMBS, CRE CLO, SBLL, Ginnie Mae, FHA/HUD, and Agency loan and property data.
