By Craig Karmin
Source: The Wall Street Journal
| This is from an edition of the Real Estate newsletter, a weekly briefing of the biggest commercial deals, news, analysis and trends in office, multifamily, retail and other commercial sectors. If you’re not subscribed, sign up here. Commercial real estate investors have a debt problem. And after years of pretending otherwise, lenders are now getting tired of acting like they don’t. The delinquency rate for office loans in commercial mortgage-backed securities climbed to a record 12.34% in January. As Peter Grant explains, the winding down of that extended period of forbearance reflects two factors. One, lenders are betting that mortgage rates aren’t going back to the historic low levels seen during the pandemic. And second, creditors increasingly believe that structural changes around the workplace and hybrid work have permanently reduced demand for most office space. The House and Senate recently passed their first significant bills in decades aimed at solving America’s housing shortage. Rebecca Picciotto offers a handy scorecard summing up what these two bills hope to achieve, from streamlining environmental reviews to making it easier to build manufactured housing. Both housing packages also include efforts to help Americans secure mortgages. Commercial real estate investors have a debt problem. And after years of pretending otherwise, lenders are now getting tired of acting like they don’t. The delinquency rate for office loans in commercial mortgage-backed securities climbed to a record 12.34% in January. As Peter Grant explains, the winding down of that extended period of forbearance reflects two factors. One, lenders are betting that mortgage rates aren’t going back to the historic low levels seen during the pandemic. And second, creditors increasingly believe that structural changes around the workplace and hybrid work have permanently reduced demand for most office space. The House and Senate recently passed their first significant bills in decades aimed at solving America’s housing shortage. Rebecca Picciotto offers a handy scorecard summing up what these two bills hope to achieve, from streamlining environmental reviews to making it easier to build manufactured housing. Both housing packages also include efforts to help Americans secure mortgages. Lenders to Commercial Real Estate Owners: Pay Up Now Refinancing property debt has become difficult since interest rates started to soar in 2022. Many lenders initially extended maturing loans they made when borrowing costs were far lower, hoping that either interest rates would fall or that cash flows would grow. It is a strategy known as “extend and pretend.” 12.34% The delinquency rate for office loans in commercial mortgage-backed securities in January, the highest level since Trepp began tracking in 2000. The surge in defaults reflects lenders’ views that mortgage rates won’t go back to historic-low levels and that demand for most office space has been permanently reduced. |