Office Delinquency Rises As Homework And Higher Fees Are Included – Cushman & Wakefield (NYSE:CWK), CBRE Group (NYSE:CBRE)

The default rate on U.S. office loans rose in June as vacancies rose due to the post-pandemic work-from-home trend and persistently high interest rates, according to a report from Fitch Ratings.

The default rate, or late payments, on loans backed by commercial mortgage-backed securities (CMBS) rose to 2.45 percent in June from 2.42 percent in May, according to the report released Friday. 30-day delinquencies rose to $1.92 billion from $1.86 billion in the same period.

30-day delinquency volume rose to $1.92 billion in June from $1.86 billion in May, pushing the 30-day delinquency rate to 0.35 percent in June from 0.34 percent in May. Office loans accounted for the largest share, accounting for 55 percent of 30-day delinquencies and totaling $1.05 billion, the report said.

Also Read: Time Gone, Office Loans: It’s Payback Season

The volume of loans at least 60 days past due reached $1.35 billion in June, up from $1.32 billion in May. Office loans accounted for 51%, or $692 million, of these new delinquencies, while retail accounted for 16%, or $214 million, and hotel accounted for 12%, or $162 million, of delinquencies.

Three of the top five new delinquencies were office loans, which accounted for 37 percent of total delinquency volume and 72 percent of office delinquency, the report said.

Central Illinoissecured by two adjoining 32-story office towers totaling 2.09 million square feet in the East Loop submarket of Chicago’s central business district, became 60 days delinquent on a $244 million loan in June 2024.

The $134 million 1615 L Street loan, secured by a 417,383-square-foot office building in downtown Washington DC, was reported as a non-performing balloon loan due June 2024 that was chronically delinquent after default on its September 2023 maturity.

The Zappettini portfolio loan, valued at $120 million and secured by a portfolio of 10 office buildings in Mountain View, Calif., came due in June 2024, according to the report.

Price action: Major commercial real estate lenders posted mixed performances on Friday.

CBRE Group, Inc. CBR gained 1.65% to close at $94.66, while Walker and Dunlop WD fell 0.47% to end the day at $99.68 and Cushman & Wakefield plc CWK rose 1.61% to $11.99.

Three exchange-traded funds that own the most CBRE shares posted modest gains on Friday. Invesco S&P 500 Equal Weight Real Estate ETF RSPR gained 1.05%, while the Real Estate Select Sector SPDR Fund XLRE gained 0.73% and the iShares US Real Estate ETF IYR increased by 0.84%.

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