Retail loan delinquencies increased sharply between the end of the second and third quarters, reports Fitch Ratings. There were $175 million more retail loan delinquencies during the third quarter alone, or an increase of 24% over the second quarter. Office loan delinquencies also increased by $101 million — or 27% — over the same period.
On the flip side, hotel loan delinquencies fell by $192 million — a 15% decrease. Earlier this year, Fitch had predicted that the hotel sector would improve during the third quarter, thanks to a decent summer travel season.
"The question is whether hotel loans can sustain the improved performance during the fourth quarter and into next year as the volatility of hotel loans is still a great concern," says Mary O’Rourke, senior director at Fitch.
Half of the decline in hotel sector delinquencies can be attributed to just four loans dropping off of the 60-day delinquent list. "The improved performance of hotel loans has masked to a large extent the declining performance of loans in other sectors," says O’Rourke.
She adds that broad-based NOI declines are impacting all property sectors across widespread geographic areas, and the softer markets will continue to see up-ticks in delinquent loans. Fitch also projects that office and industrial loan delinquencies will increase overt the next three quarters as retail delinquencies continue to slow.