Fitch Ratings expects US CMBS loan defaults to increase in 2016 after five straight years of declines.
The cumulative default rate in 2015 fell to 13 percent from 13.3 percent in 2014, but it will “increase slightly” this year as the current credit cycle matures, as “CMBS 2.0 loans begin to default at a higher rate and new issuance volume declines,” the ratings agency said in a statement.
In addition, “maturity defaults also stand to increase in the next few years as peak vintage loans, many of which are over-levered, mature,” added senior director Brook Sutherland.
Peak vintages drove defaults in 2015, with 2005-2007 loans accounting for nearly 88 percent of the total. That said, 181 loans defaulted with a balance of $2.7 billion in 2015, compared to 294 loans totaling $3.9 billion in 2014 and 353 loans totaling $5.4 billion in 2013.
“Commercial real estate markets had another good year in 2015 as the economy continued to grow, healthy new issuance volume provided ample liquidity and new construction remained generally muted,” Sutherland said.
Office defaults handily outpaced all other property types, with 64 loans defaulting totaling $1.4 billion (53%) in defaults. That compares to 86 office defaults totaling $1.2 billion in 2014 and 141 office loans totaling $2.6 billion in 2013.