CMBS Newsflash: On the Trail of Multifamily Performance

The beginning of August appears to mark an inflection point in commercial real estate loan performance. Six months into the COVID-19 crisis, we recognize that many economic supports have expired and new ones are still being debated by our political parties.  We are also at a crossroads of soon ending forbearance mandates, exhaustion of property reserves, and the end of prohibitions on evictions. In addition, the initial cause of this crisis, COVID-19, continues to sustain its threat to our health and thereby restrict social interactions.

With no doubt, multifamily properties have performed far better than expected by most in early March. Second quarter data shows a lack of stress on both the capital and space markets. National vacancies remained below 5% and asking and effective rents declined by a modest 0.4% in the quarter. Transaction volume is certainly stunted, but the few deals that are occurring are not at bargain prices. For the sector to maintain this stability, progress and confidence in controlling the spread of the virus, and new economic support from the government and central bank are needed. The support would directly affect multifamily tenants’ ability to pay rent, while the slowing of the virus would boost the prospects of the hard-hit retail and lodging sectors, lessening the cross-sector impacts…

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