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.

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