Lou Sickelman
According to two recent reports, repo man jobs are on the rise in commercial real estate.
Commercial real estate foreclosures increased 6% this year in March and are up 117% from March 2023, according to ATTOM data.
Similarly, while 97% of all real estate loans were not delinquent or were less than 30 days late, the percentage of loans that were 90 days or more late increased to 2.5% in the three months ended March 31 from 2.3% in the fourth quarter of last year, according to data released by the Mortgage Bankers Association.
If these properties continue to fall behind on their payments and other properties follow suit, it is highly likely that the number of foreclosures will continue to rise.
Real estate data analytics firm ATTOM reported that the lowest number of foreclosures overall on commercial real estate was in May 2020, when lenders filed just 141 cases. But in March of this year, 625 foreclosure notices were filed.
That's a 117% year-over-year increase from the low point in 2020, but it's still lower than the peak of 889 foreclosures in October 2014, when lenders canceled foreclosures.
Areas where foreclosures are declining
California saw a record high of 187 commercial residential foreclosures in March, down 8% from February but up 405% from a year ago, the ATTOM report showed. The increase has continued since November 2023, when more than 100 commercial residential foreclosures occurred.
New York, Florida, Texas and New Jersey also saw a continued rise in commercial property foreclosures, with 161 recorded in New York, 60 in Florida, 55 in Texas and 42 in New Jersey in March.
The ATTOM report incorporates documents filed during all three phases of foreclosure: defaults (including notices of default and filings of disputed claims), auctions (including receivership sales and notices of foreclosure sales), and real estate-owned properties that have been foreclosed and repurchased by the bank.
About 7% of all loan balances were 30 days or more delinquent at the end of the quarter, up from 6.5% at the end of 2023.
Loans by property type
The latest ATTOM report didn't provide a breakdown by commercial real estate sector, but the MBA reported that office secured loans are driving the increase in payment delinquencies.
“Loans of all real estate types are adapting to rising interest rates and uncertainty in property values,” Jamie Woodwell, MBA's director of commercial real estate research, said in prepared remarks. “But continued uncertainty about the impact of hybrid work is adding new challenges for office properties and their loans.”
Woodwell noted that every type of commercial property faces numerous challenges, including location, loan size, repayment terms, ownership stability, lender patience, etc. “Each of these factors will play a role in determining which loans will face challenges and which will not,” he added.
In other commercial sectors, 6.3% of lodging loan balances were delinquent, up from 6.1% in the fourth quarter of 2023. 4.7% of retail balances were late, down from 5% the previous quarter. 1.2% of multifamily mortgages were late, unchanged. 1.2% of industrial loans were delinquent, up from 0.9%.
By MBA calculations, 20% of the $4.7 trillion in outstanding commercial mortgage debt will come due this year.