CRE Loan Delinquency Growth Is Slowing as Lending Goes Up

Even as CRE loan delinquency growth is slowing down compared to previous quarters, overall CRE lending is on the rise across sectors, with multifamily leading the way.
June 4, 2024
  • Delinquency growth slowed for 2 consecutive quarters, hitting 1.25% in Q1.
  • Banks enhance loss reserves for office loans, lowering net charge-off rates across CRE loans.
  • Lenders are actively making portfolio adjustments with sales of CRE, multifamily, and construction loans.
Key Takeaways

April saw a marked increase in special servicing but a slowdown in CRE loan delinquency growth, according to S&P Global Market Intelligence as reported on GlobeSt.

Special Servicing Spike

April saw the biggest jump in special servicing in four years. But despite a new high in delinquencies, the delinquency growth rate was lower than in previous quarters.

S&P Global highlighted that the growth in delinquencies slowed for the second consecutive quarter. The increase in overdue CRE loans across U.S. banks was also less severe than in previous quarters, reaching 1.25% in Q1.

Regulators are monitoring banks closely due to exposure concerns, especially regarding office sector stress and lower asset valuations.

Several major lenders have bolstered their loss reserves for office loans, contributing to lower net charge-off rates across CRE, multifamily, and construction loans.

CRE Loan Growth

Yet despite these negative signs, overall CRE loan growth was actually up 3% YoY in Q1 from the 2.9% recorded in 4Q23, but behind the 12.1% growth from 3Q22. 

Multifamily rose to the top of the charts, recording 4.5% more loans compared to the 2.1% loan growth observed in Q4, but also far below the 17.7% reported in 3Q22.

Some banks are also taking steps to reduce CRE loan concentration through strategic sales. Noteworthy adjustments include Valley National Bancorp’s shedding $151M in CRE and $45.6M in construction loans, and WaFd Inc.’s sale of $3.2B in multifamily loans.

With varying CRE loan exposure and growth among major banks, the sector’s overall median growth is noteworthy.

Why It Matters

Understanding how banks are navigating challenges and adjusting their loan portfolios provides insights into the broader market landscape. With regulatory concerns looming and economic uncertainties persisting, understanding how banks are adjusting their loan portfolios provides key insights into where the market may be headed.

And the sector’s overall median growth over the past two quarters is definitely noteworthy.

I’m an award-winning copywriter and digital marketing consultant who co-founded Tailored Ink. I help business owners and marketers craft the right messaging and create content at scale to grow their brands, generate leads, convert them into customers—and even get acquired by their competitors. As a member of Young Entrepreneur’s Council (YEC) and a columnist for sites like Forbes, Entrepreneur, and Business Insider, I also help mentor current and aspiring entrepreneurs and marketing professionals.
CRE Daily is a digital media company covering the business of commercial real estate. Our mission is to empower professionals with the knowledge they need to make smarter decisions and do more business.
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