DBRS Morningstar released a commentary titled “Coronavirus and Volatile Oil Prices Elevate Risk on Houston CMBS,” which identifies and analyzes the major hurdles Houston is currently facing—the Coronavirus Disease (COVID-19) pandemic, depressed oil prices, and overbuilding that began before the pandemic. DBRS Morningstar notes, however, that certain commercial mortgage-backed securities (CMBS) loans backed by properties in Houston appear to be able to weather the downturn. Select property types in Houston, and around the country, have struggled more than others. Delinquency rates have risen, and DBRS Morningstar has seen several large loans transferred to special servicing. While Houston grapples with these issues, DBRS Morningstar believes that the city will see a slow but successful recovery.
William McClanahan, an analyst on the North American CMBS team, says, “Oil dependency and overbuilding have made Houston a challenging real estate market to navigate during this pandemic. Pre-existing issues with overbuilt markets and high vacancies caused Houston to be hit especially hard. However, the Houston market has persevered and currently presents similar figures when compared with other large metropolitan statistical areas.”
The commentary is available at www.dbrsmorningstar.com.
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