By Matt Tracy
(Reuters) – Late payments on U.S. commercial property loans rose in November, driven by growing distress among office properties, according to a new report by Kroll Bond Rating Agency.
The delinquency rate on U.S. commercial mortgage-backed securities (CMBS) reached 4.4% in November, climbing 19 basis points (bps) from October’s 4.21%, according to a Tuesday report by KBRA.
The trend is a reminder of the continued challenges facing property owners, which have struggled to keep up with interest payments and refinance their loans in an elevated rate environment.
While loan distress on other property types such as retail and lodging have declined, those backed by offices climbed 116 bps to 8.84% in November.
In its analysis of over $315 billion in CMBS, KBRA recorded 26 office loans this month that either became delinquent or faced default.
Analysts and market participants have attributed much of offices’ woes to the persistent post-pandemic remote working trend, which has led companies to avoid renewing their leases.
Among the largest office loans in November facing default was RXR Realty’s $670 million loan on the Helmsley Building, a skyscraper located at 230 Park Avenue in New York City.
Office distress has accounted for roughly three-quarters, or $1.6 billion, of $2.1 billion in total newly distressed CMBS loans this month.
Meanwhile, loan distress among retail and lodging properties declined for the sixth and fourth straight month respectively.
(Reporting by Matt Tracy; Editing by Josie Kao)
