It’s been a rough year and a half or so for commercial property owners and their tenants. The COVID-19 pandemic has forced businesses to close or drastically shift their priorities. Consequently, many renters fell behind, and commercial property owners were unable to make loan payments.
But things are looking up. According to the most recent data, more property owners are catching up on delinquent loans. But there are still a few areas of concern in the commercial property sector.
Commercial Loan Delinquencies Continue to Decline
In December 2020, CoStar’s predictive model produced some alarming projections for delinquencies. Figures were as high as $659 billion over the next five years. Since then, the company has walked back some of those predictions based on the fact that several of the downside assumptions in the models used never materialized.
Even better news came out in mid-summer. According to July’s MBA CREF Loan Performance survey, there was a slight improvement in delinquency rates with all property types.
Just because a loan is troubled, that doesn’t mean it’s doomed. These past 18 months have proven that some borrowers simply need more time or some assistance to get the loan back on track for the long term.
Some Distress Remains in the Commercial Property Space
The data recently released by MBA does show that some commercial property sectors are more troubled than others. Specifically, the retail and lodging spaces are having a tough time. Even so, loan delinquencies in both sectors dropped by about one basis point each in July.
What happens with the COVID-19 pandemic, and particularly the Delta variant, will be pivotal for both of these areas. If cases rise again, it could impact people’s and businesses ’ plans to return to the office or travel.
Even borrowers in these sectors that have run into trouble are getting the time they need to resolve their issues. A combination of historically low interest rates, moratoriums on litigation, and lender forbearance have afforded many borrowers with enough options to avoid becoming another statistic in this long battle.
Need Commercial Property Assistance in Charleston, SC?
The overall market nationwide and locally continues to improve. If you are a commercial property owner or are looking for the right space, find out how Caldwell Commercial can help. Our property managers and commercial realtors have over 80 years of combined experience, making us a trusted partner for commercial real estate in the Charleston area. Contact us today.
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