By one key measure of the struggling commercial real estate market, the greater Los Angeles area is near the top of the nation.
Owners in the Los Angeles-Long Beach-Anaheim market face the highest loan balances and distress risk as owners of U.S. office, hotel and retail properties struggle to pay off mounting debt, rising interest rates and falling values, According to the San Francisco Business Times.
Commercial real estate landlords across the U.S. are waiting for higher interest rates, low office returns and tepid leases in the wake of the pandemic.
Los Angeles faces $17.9 billion in debt maturing within the next 18 months, with more than $800 million of that showing signs of being in trouble, according to The Business Times.
An analysis identifies which metro areas will have the most commercial mortgage-backed securities debt and face challenges refinancing loans by the end of next year. It also looks at the top markets where CMBS distress is most severe.
New York tops the list of commercial mortgage-backed securities debt due Dec. 31, 2024, with $39.8 billion in debt.
Los Angeles ranks second with $17.9 billion in debt maturing over the next 18 months. It was followed by Miami ($12.6 billion), San Francisco ($11.4 billion) and Las Vegas ($10.6 billion).
The analysis examined all commercial real estate types financed by CMBS debt and repayment loans, as well as those flagged by loan servicers as facing some degree of distress, The Business Times reported.
When only weeding out non-performing loans due by the end of next year — including loans that are on a servicer’s watch list, or are in special service, or have been flagged as delinquent, foreclosed, bankrupt or due Long-term and non-performing loans—cities face similar dilemmas.
New York had 149 CMBS loans in distress with a total outstanding balance of $2.6 billion, followed by Chicago with 79 loans with a total outstanding balance of $1.5 billion, and San Francisco with 134 loans with a total outstanding balance of $1 billion.
Los Angeles follows with more than $800 million in distressed debt.
The CMBS market represents only a fraction of commercial real estate distressed and maturing loans in any given metro area.
The CMBS office delinquency rate jumped to 4.5% in June, compared with 1.86% at the start of the year, Trepp said. Among properties carrying CMBS debt, retail and hospitality assets had the highest delinquency rates, with 6.48% for retail properties and 5.35% for lodging.
But the gap between retail and accommodation arrears and office arrears is narrowing
Within the next three years, the loan will mature More than 9,500 office buildings, representing 17% of the U.S. office stockAccording to analysis by CommercialEdge.
Nearly $1.5 trillion of the nation’s commercial real estate debt will mature by the end of 2025, according to Morgan Stanley analysts.
read more
— Dana Bartholomew
