Stressed Out: Are Commercial Properties Close to Default?

To determine the potential for defaults and investment opportunities, Yardi Matrix analyzed loans from its multifamily and office property database and found prospective trouble spots over the short and long term.
Paul Fiorilla, Director of Research, Yardi Matrix

COVID-19 has put enormous stress on commercial real estate. Many office buildings are nearly empty as people work from home, while retail and hospitality are operating at a fraction of pre-pandemic levels. National multifamily data is down only slightly from first-quarter peaks, but urban apartments are losing tenants and government support that has propped up the sector is in doubt.

Misfortune for property owners, however, is a lure for distressed investors, who had little to chew on during the long, profitable 2010s cycle, as default rates of loans originated post-financial crisis were miniscule. Now vulture funds are sharpening pencils in anticipation of increased delinquencies, although so far distress has been concentrated in hospitality and retail. Government support for individuals and laws and policies mandating forbearance have helped keep delinquencies down.

Read the full report on the Yardi Matrix website.