Delinquency rate on commercial real estate loans climbed in March

Jessica SarterCommercial Lending

The market for commercial real estate loans appears to be tightening, as data released this week by research firm Trepp shows the continuation of a gradual increase in delinquency rates for commercial mortgage-backed securities (CMBS).

Trepp's March 2012 U.S. CMBS Delinquency Report shows commercial property loans increased by 31 basis points last month to reach 9.68 percent, making for a total delinquent loan value of roughly $58.1 billion.

A slew of new late payments, which totaled more than $5 billion, put 91 basis points of upward pressure on the delinquency rate, with multifamily and office properties suffering the most significant losses of all surveyed real estate categories. The delinquency rate for hotel properties fell by 42 basis points and was the only major property type to show improvement.

"We predicted late last year that the delinquency rate would rise largely on the impact of 2007 loans coming due, and today's report underscores that forecast," said Manus Clancy, senior managing director at Trepp. "After the rate fell nicely in January and February, we were cautiously hopeful that we'd be wrong."

"This month's report shows that the market has a lot of wood to cut and that a rate north of 10 percent can't be ruled out," Clancy added.

While commercial borrowers may be having a more difficult time paying off loans, many applicants have begun seeking new means of financing their operations. Earlier this week, Thomson Reuters and PayNet reported a slight improvement in small business lending activity for February.

Lending marketplaces like Boefly can be tapped by commercial, franchise or small business borrowers to search for ideal lenders and credit opportunities.