CMBS Delinquency Rises

Defaults are rising for loans tied to commercial mortgage-backed securities (CMBS). In fact, a key industry delinquency rate was 33 basis points higher in February than in January. The news is mixed, though, depending on which property type a loan is for. Now, for some sunnier news: While other office markets struggle with high vacancy and stagnant rents, South Florida’s hums merrily along. Why is that?

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— Tom Acitelli, Co-Deputy Editor

CMBS Delinquencies Jump in February

The CRED iQ delinquency rate for CMBS for February increased to 3.58 percent. The delinquency rate was 33 basis points higher than the prior month, when it stood at 3.25 percent. The month-over-month increase in delinquency pushed the rate to its highest level since April 2022. The delinquency rate is equal to the percentage of all delinquent specially serviced loans and delinquent non-specially serviced loans, for CRED iQ’s sample universe of $600 billion-plus in CMBS conduit and single-asset single-borrower (SASB) loans. CRED iQ’s special servicing rate, equal to the percentage of CMBS loans that are with the special servicer (delinquent and nondelinquent), also increased month-over-month to 5.10 percent from 4.71 percent.

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Why South Florida's Office Market Shines As Other US Regions Struggle

When Deco Capital founder Bradley Colmer gained control of a vacant site in Miami Beach’s swanky Sunset Harbour neighborhood overlooking Biscayne Bay, he envisioned building a luxury boutique condo. The developer went as far as to secure approvals for a five-story residential project. But in 2018, after studying the Miami Beach market, already saturated with condo properties, Colmer and his team chose to develop an office property instead, betting that high-powered companies would seek a base in the Magic City thanks to its year-round sunshine and low taxes. Five years later — despite the rise of remote work, which has emptied offices across the country and turned office buildings into one of real estate’s most beleaguered asset classes — Colmer said that his “thesis had been validated.” Even as the future of work remains in limbo thanks to hybrid and remote models, and marquee markets such as San Francisco and New York struggle to recover from the pandemic, Miami has emerged as a boomtown for offices.

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