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Available commercial space in Manhattan. Photo: Lev Radin/Pacific Press/LightRocket via Getty Images

Disappearing revenue at hotels and throughout the entertainment and hospitality industries is straining the U.S. commercial real estate market, as delinquencies rise at a record pace and credit ratings continue to fall.

Why it matters: Ratings agencies are growing especially concerned about the commercial mortgage-backed securities (CMBS) market — the business side of the residential mortgage-backed securities market that touched off the 2008 global financial crisis.

The intrigue: The Fed has stepped in to provide funding to the CMBS market, but industry groups say it's not enough, and data show that despite the Fed's backstop the market is experiencing significant stress.

Driving the news: Ratings for new CMBS issues "deteriorated in the second quarter, with leverage rising and debt service coverage falling," per a new report from S&P Global.

By the numbers: Nearly one-quarter of loans backed by U.S. hotels in CMBS were at least 30 days delinquent for June, while the delinquency rate for all property types reached 10.32%, just short of the all-time high of 10.34%, according to Trepp.

  • Some 6.25% of loans were "seriously delinquent" for the month.
  • "The figures represent a sharp escalation from the months before the pandemic, when the overall delinquency rate hovered below 3%," S&P Global analysts said in a July 2 research note.

The last word: "Without action to shore up commercial debt, especially CMBS loans, the hotel industry will experience mass foreclosures and permanent job losses which will snowball into a larger commercial real estate crisis impacting other segments of the economy," American Hotel and Lodging Association president Chip Rogers said in a statement earlier this month.

Go deeper

Dion Rabouin, author of Markets
Oct 15, 2020 - Economy & Business

Corporate credit ratings downgrades fell by 74% in Q3

Illustration: Aïda Amer/Axios

After hitting a record high in the second quarter, the number of U.S. corporate ratings downgrades fell to its lowest level since Q4 2018, according to S&P Global Ratings.

By the numbers: S&P lowered 107 U.S. corporate issuer credit ratings in the third quarter — 74% fewer downgrades than in Q2, as upgrades nearly doubled to 43.

Trump's coronavirus adviser Scott Atlas resigns

Photo: Nicholas Kamm/AFP via Getty

Scott Atlas, a controversial member of the White House coronavirus task force, handed in his resignation on Monday, according to three administration officials who discussed Atlas' resignation with Axios.

Why it matters: President Trump brought in Atlas as a counterpoint to NIAID director Anthony Fauci, whose warnings about the pandemic were dismissed by the Trump administration. With Trump now fixated on election fraud conspiracy theories, Atlas' detail comes to a natural end.

Dave Lawler, author of World
2 hours ago - World

Assassination in Iran sets stage for tense final 50 days of Trump

The funeral ceremony in Tehran. Photo: Iranian Defense Ministry via Getty

Iranian leaders are weighing their response to the assassination of Mohsen Fakhrizadeh, known as the father of Iran’s military nuclear program, who was given a state funeral Monday in Tehran.

The big picture: Iran has accused Israel of carrying out Friday’s attack, but senior leaders have suggested that they’ll choose patience over an immediate escalation that could play into the hands of the Israelis and the outgoing Trump administration.