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DBRS Morningstar CMBS Monthly Highlights - March Remittance

DBRS Morningstar presents the Monthly Highlights report, which covers CMBS market activity and performance for conduit and SASB loans (excluding agency loans). In March:

-- The volume of delinquent loans continues to fall, declining by nearly $650 million and pushing the March delinquency rate down 11 basis points (bps) to 3.54%, the lowest level since April 2020.
-- Compared with year-ago levels, the hotel sector saw the largest percentage decline in delinquent balance, falling 54.3%, followed by multifamily with a 41.0% decrease.
-- The special servicing rate fell for the 18th straight month, down 31 bps to 5.63%, as the volume of loans returned to master servicing continues to outpace new transfers by a healthy margin.
-- The retail sector saw the steepest special servicing rate decline, falling 106 bps to 11.16%.
-- Liquidation activity remains subdued by historical standards as the volume of liquidated loans posted its seventh consecutive month below $400 million while the weighted-average loss severity sits below its historical average.
-- The year-to-date maturity payoff rate stands at 64.1% through March, and we expect it to improve to roughly 75% by year-end based on improving metrics and a strengthening economy.
-- While a resurgence in consumer spending should energize the retail sector, which accounts for nearly 40% of maturing loans, roughly 24% of these loans have a debt service coverage ratio less than 1.10 times, which may limit their ability to obtain takeout financing.
-- Despite the ongoing uncertainty in the office sector, which accounts for nearly 25% of maturing loans, as the omicron variant continues to threaten plans for a full return to offices, accelerated virtual working trends may affect office demand less than commonly thought. Although employees may spend less time in the office, the need to accommodate peak office attendance limits the amount of potential reductions in space.