The commercial real estate market in the United States is going through some tough times, and Dallas-Fort Worth (DFW) is no exception, with the number of properties suspected of being in financial distress increasing by a significant margin since the beginning of the year.
In Q1, the number of DFW properties on the commercial mortgage-backed securities (CMBS) watch list, which flags commercial properties facing specific events that could put owners at a bigger risk of defaulting on their loans, is up 33%, totaling 450, the Dallas Business Journal reported.
The news comes amidst a building boom in the DFW metroplex, a consequence of years of significant population increases due to people moving to the area from other parts of the country, as previously reported in The Dallas Express.
Research into the watch list update was conducted by Steve Triolet, senior vice president of research and market forecasting operations for the Dallas branch of Partners Real Estate. He told the Dallas Business Journal that the main driver of the increase was multifamily housing projects, accounting for 113 of the 450 on the watch list.
“The majority of those — 57 out of the 113 — are Class C properties. That’s a common denominator.” Triolet said.
He went on to explain that refinancing in the DFW market could become a bit trickier because of the state of the field:
“So when you already have these properties that are subpar — particularly when I’m talking about Class C multifamily — it makes the owners and the banks nervous. The lender wants more money. They want the owners to put more cash into the property. They want them to be less leveraged.
He made sure to note, however, that just because properties are on the watch list does not mean they are at immediate risk of foreclosure or are delinquent in their payments.
As previously reported in The Dallas Express, multifamily properties have been a key driver of growth in the North Texas area, despite some of the inefficiencies and long wait times in the City of Dallas’ permitting process. Still, the DFW metroplex and Texas as a whole seem to be faring better than other parts of the country.
“Texas has less on the watch list than a lot of the coastal markets — the San Franciscos and New Yorks of the world,” Triolet told the Dallas Business Journal.
