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DBRS Morningstar Monthly Highlights - January Remittance

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

-- After taking a breather in December, the delinquency rate resumed its decline in January, tumbling 47 basis points (bps) to 3.86%, the lowest level since April 2020.
-- Compared with year-ago levels, the hotel sector saw the largest percentage decline in delinquent balance, falling 54.7%.
-- The special-servicing rate fell for the 16th straight month to 6.33% but still sits well above the low of 2.60% set in February 2020.
-- The hotel sector saw its special-servicing rate continue to fall, while retail posted a 2-bp rise.
-- Both the volume of liquidated loans and losses declined for the second consecutive month, with retail and office assets accounting for more than 75% of both the liquidated loan balance and the total loss.
-- Despite the January maturity payoff rate coming in at less than 50%, we expect it to rebound and rise to roughly 70% to 75% for 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 (DSCR) less than 1.10 times (x), 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.