Hello Investor,

As we dive into Q3 2024, the commercial and multifamily real estate markets are showing some interesting shifts—shifts you might want to keep on your radar. The latest numbers are in, and while there are a few bumps, there’s a lot to feel optimistic about. Let’s unpack what’s happening in each sector and, more importantly, what it means for your investment strategy.

Spotlight on Delinquencies: Who’s Rising, Who’s Staying Steady?

The overall market resilience continues, with 96.8% of commercial loan balances remaining current—just a slight dip from last quarter’s 97%. Yet there are a few sectors pushing the needle, each with a unique story:

• Office Properties: These are feeling the squeeze, with delinquency rates creeping up from 7.1% to 7.8%. As companies navigate hybrid work models, office spaces are still finding their footing in a transformed landscape.
• Lodging: Hotels are holding strong, with delinquencies ticking down from 5.8% to 5.6%. With travel roaring back, this sector is stabilizing, bringing confidence to our portfolios.
• Retail: A bounce back is happening here, too, with delinquencies dropping to 3.8% from 4.5% last quarter. Consumer spending is a positive signal for retail-backed loans.
• Industrial: Logistics and warehousing properties continue to thrive, with delinquency rates dropping from 0.8% to 0.6%. These properties remain a solid choice in our investment mix.

Multifamily: Steady Demand, Minimal Bumps

Multifamily investments remain our steady rock. With only 1.2% of multifamily loans delinquent—up just a touch from 1.1%—the demand for housing continues to provide stability, reinforcing multifamily as a key component in our diversified strategy.

Breaking Down Capital Sources: Navigating the Risk Spectrum

Different funding sources bring varying levels of resilience. CMBS loans, often yielding higher returns, are steady at a 4.8% delinquency rate. Meanwhile, traditional sources like FHA and GSE loans showcase resilience and lower risk:

• FHA Multifamily & Health Care: Delinquencies held steady at 0.9%.
• Life Company Loans: Improved to 0.9% from last quarter’s 1.0%.
• GSE Loans: A minor uptick to 0.5%, but still among the lowest risk.

What This Means for You: A Balanced, Resilient Portfolio

With $2.6 trillion of commercial and multifamily mortgage debt surveyed, we’re not only seeing trends but actively positioning ourselves to navigate them. This is a time to stay vigilant and diversified. We’re here to help you make the most informed decisions, protecting your investment while seizing opportunities in stable, growth-focused sectors.

Looking Forward

It’s natural to see fluctuations in a dynamic market. But rest assured, your investments are managed with a strategy built on resilience, market insight, and forward-thinking adjustments.

Here’s to navigating the future together with confidence and clarity,

Kendubay Properties