'Sand States' Feeling the Pain

The commercial real estate market is seeing almost no new construction, according to Jamie Woodwell, vice president of commercial/multifamily research at the Mortgage Bankers Association.

Just as the pullback in demand has had a huge impact on the industry, this trend could impact inflation when the market gets back to a period of absorption.

"We're going to see low construction and the general concern of the lack of clarity from investors will keep folks from putting too much into the ground," Woodwell said at an MBA conference on commercial servicing. "On the inflation side for commercial real estate properties, this may push it up a little bit higher."

In terms of loan-to-value ratios, the key point is that there is "so little change in hands, it's impossible to get good numbers," he told the conference.

Property type and location are the biggest drivers of CMBS delinquency rates, he said. In April, lodging reported a 17% CMBS delinquency rate, followed by multifamily at 13%, retail at 6% and office at 5%. There is a large variation in delinquency rates by state. The "sand states," which are driving some of the largest numbers for single family, are now seeing pain on the commercial side.

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