The post-COVID economic comeback is actually helping CRE in general, but instead of updating overdue properties, it keeps more distress at bay.
A new analysis from Moody’s Analytics REIS notes that the pandemic “has exposed weak assets, accelerating their deterioration”, particularly with regard to older malls in slow-growing areas and accommodation properties intended for travel in France. ‘business.
But despite this, “lenders and borrowers seem to be more inclined to provide a survival lane in this industry,” write David Salz and Thomas LaSalvia of Moody’s. “Trainings, modifications / abstention and even current events have been more evident in accommodation than in retail. As a borrower, the option to discount the loan and keep the asset seems like a good decision in a firming / rising market.
The delinquency segment over 121 days as of July contained about $ 16 billion in loans, and more than three-quarters were in the retail or hospitality industries. About $ 1.2 billion left this category, with modification or forbearance accounting for more than half of that number.
“While changes in general have slowed down in recent months, they remain a formidable tool for reducing serious delinquency,” note Salz and LaSalvia. “It is interesting to note the small amounts of loans that are becoming mainstream, especially in light of the strength of the economy… the current economy certainly prevents some borrowers from becoming seriously delinquent; however, as the loans fall into the 121+ delinquency category, there are additions on a monthly basis. In July, there were additions of $ 1.07 billion, of which 24% was in the accommodation sector and 51% in the retail sector.
They note that at this point distressed assets are likely to suffer from “overall weakness in a changing commercial real estate environment”.
“Retail is changing and a strong economy may not help discount all of these loans,” Salz and LaSalvia said. “For accommodation, many properties still struggling will remain so until business and international travel join the leisure travel revival.”