Delinquency spiral: New Trepp sentiment survey forecasts rising problem loans

The survey shows widespread, albeit measured, pessimism around commercial real estate in the coming year.

The vast majority of Trepp survey respondents see commercial mortgage-backed securities, and more broadly commercial real estate delinquencies, rising due to continued onerous inflation, surging interest rates and stagnant economic growth. 

 The annual Trepp Sentiment Survey quizzed more than 20,000 players across the spectrum of commercial real estate on their outlook for the next year. The results, while not alarmingly bearish, were not pretty either. 

More than 90 percent of respondents predicted the nation would be in recession by 2024 at the latest, with 25 percent predicting a recession by the end of the year. Sixty-three percent predicted higher interest rates to negatively affect their business, while more than half predicted the CPI to reach 10 percent by the end of the year, despite those rate hikes. 

Despite widespread negativity, the report does have some positive points.  

Most respondents did not think severe macroeconomic scenarios, such as the S&P 500 falling below 3200 or oil topping $150 a barrel, would occur. And while more than half thought CRE fundamentals were declining, only 6 percent said conditions would be “significantly worse.”