The coming CMBS implosion
The commercial real estate sector is imploding at it's fastest rate since the dotcom implosion. Even faster than in 2008. What this means is that $1.5 Trillion in CMBS debt is in trouble.
After blowing through the pandemic with no more than a squiggle, the delinquency rate of Commercial Mortgage-Backed Securities (CMBS) backed by office properties jumped to 4.5% by loan balance in June, up from 1.6% just six months ago in December 2022, according to Trepp, which tracks and analyses CMBS.Office mortgages that had been packaged into CMBS went through a horrendous default cycle following the Financial Crisis, with the delinquency rate topping out at over 10% in 2012/2013.
But this current six-month 2.9-percentage-point spike from 1.6% to 4.5% is the fastest six-month spike in Trepp’s data going back to 2000
Believe it not the San Francisco area is not going to be the worst hit. New York is #1, with Los Angeles being #2.
Not surprisingly, the major gateway markets are carrying the highest amount of maturing CMBS debt within the next 18 months. New York leads the list with approximately $39.8 billion, followed by Los Angeles ($17.9 billion), Miami ($12.6 billion), San Francisco ($11.4 billion), and Las Vegas (nearly $10.6 billion).
With interest rates continuing to rise, it's hard to say just how bad things could get.
New York topped the list for commercial-mortgage backed securities debt set to mature by Dec. 31, 2024, at $39.8 billion.Los Angeles came in at No. 2, with $17.9 billion in debt maturing within the next 18 months. It was followed by Miami with $12.6 billion, San Francisco with $11.4 billion and Las Vegas with $10.6 billion.
New York has 149 CMBS loans facing distress that have a combined outstanding balance of $2.6 billion, followed by 79 loans with a total balance of $1.5 billion in Chicago and 134 loans with a balance of $1 billion in San Francisco.
Los Angeles followed, with more than $800 million in distressed debt.
Comments
Economics: Not "science", but certainly "dismal"
The trouble with this, as always, is that it's blasted hard to understand what one is even reading; might as well toss a Dungeons & Dragons Monster Manual at someone who knows nothing about that ('Yup...those are, uh...some big numbers, alright!').
Because that's what it is: Just a huge-ass game with sprawling, byzantine rules by multiple authors who often aren't even perceiving the same reality - but this one is allowed to determine real life and death.
Even then, people can't even be sure it WILL matter to them, or how!
I SEE the data; what ever is one to DO with it?
In the Land of the Blind, the One-Eyed Man is declared mentally ill for describing colors.
Yes Virginia, there is a Global Banking Conspiracy!
Enhanced by the pandemic...
...and the "work from home" routine, which most people want to continue.
“Until justice rolls down like water and righteousness like a mighty stream.”
The canary in the coal mine
I don't know a lot about the business affairs of Blackstone but they just took a 36% loss on commercial property they held for a decade. They have been blocking withdrawals from their REIT since November.
“He may not have gotten the words out but the thoughts were great.”