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DBRS Morningstar Monthly Highlights - December Remittance

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

-- After posting a strong year, the delinquency rate, which is down 351 basis points (bps) from a year ago, rose for the first time in 18 months as several new office delinquencies pushed the delinquency up 20 bps to 4.33%.
-- Compared with year-ago levels, the hotel sector saw the largest percentage decline in delinquent balance, tumbling 55.1%.
-- The special-servicing rate fell for the 15th straight month to 6.69% but still sits well above the low of 2.59% set in February 2020.
-- Hotel and retail saw their special-servicing rates continue to fall while office posted a 34-bp rise, its second consecutive monthly increase.
-- Both the volume of liquidated loans and losses declined modestly, with retail and office assets accounting for more than 75% of both the liquidated loan balance and the total loss.
-- Compared with last year, the volume of liquidated loans edged down while the weighted-average loss severity jumped to 61.9%, up from 48.8% in 2020.
-- The maturity payoff rate finished the year below 60%, but we expect it to rise to roughly 70% to 75% in 2022.
-- While a resurgence in consumer spending should energize the retail sector, which accounts for nearly 40% of maturing loans, roughly 20% have a debt service coverage ratio less than 1.10 times, which may limit their ability to obtain takeout financing.
-- Despite continued 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.