SF nearly tops nation on pending CMBS maturities, distress

$11B set to mature by end of next year, red flags on $1B

San Francisco
(Getty)

Greater San Francisco nearly tops national lists by one key measure of the struggling commercial real estate market.

As U.S. landlords of office, hotel and retail properties work to pay off mounting debt, with interest rates rising and values falling, those in the San Francisco-Oakland-Hayward market carry some of the highest loan balances and distress risk, the San Francisco Business Times reported.

Commercial property owners across the U.S. have hunkered down against higher interest rates, low returns-to-office and tepid leasing following the pandemic.

San Francisco faces $11.4 billion in debt maturing within the next 18 months, with signs of distress on 134 loans with a balance of $1 billion, according to the Business Times.

An analysis pinpointed which metropolitan areas will see the most commercial-mortgage backed securities debt by the end of next year, facing challenges refinancing loans. It also looked at top markets with the most CMBS distress.

New York topped the list for commercial-mortgage backed securities debt set to mature by Dec. 31, 2024, at $39.8 billion.

Los Angeles came in at No. 2, with $17.9 billion in debt maturing within the next 18 months. It was followed by Miami with $12.6 billion, San Francisco with $11.4 billion and Las Vegas with $10.6 billion.

The analysis examined all commercial real estate property types financed with CMBS debt and loans current on payments, as well as those marked by loan servicers as facing some amount of distress, according to the Business Times.

When weeding out only the distressed loans set to expire by the end of next year — including those on loan servicer watchlists, or in special servicing, or marked as delinquent, in foreclosure, bankrupt or matured and nonperforming — various metros faced similar straits.

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New York has 149 CMBS loans facing distress that have a combined outstanding balance of $2.6 billion, followed by 79 loans with a total balance of $1.5 billion in Chicago and 134 loans with a balance of $1 billion in San Francisco.

Los Angeles followed, with more than $800 million in distressed debt.

The CMBS market represents just part of the commercial real estate distress and loans maturing in any given metro area.

The CMBS office delinquency rate jumped to 4.5 percent in June, after starting the year at 1.86 percent, according to Trepp. Of properties carrying CMBS debt, retail and hospitality assets have the highest delinquency rates, with retail properties at 6.48 percent and lodging at 5.35 percent. 

But the gap between retail and lodging delinquencies and office delinquencies is narrowing

Within the next three years, loans are maturing on more than 9,500 office buildings and 17 percent of all U.S. office stock, according to an analysis by CommercialEdge.

Nearly $1.5 trillion in commercial real estate debt nationwide will mature by the end of 2025, Morgan Stanley analysts say. 

— Dana Bartholomew

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