In its two-year study, Fitch Ratings analyzed the performance of 21,334 commercial properties from 2008 to 2010, which secure its current $270.4 billion fixed-rate CMBS portfolio. Just over one-third of the portfolio is secured by office, another 33% by retail, 14% multifamily, 7% hotel, 6% industrial/warehouse, and 6% other property types.

Hotels have seen the largest performance declines over the last two years, with NOI dropping 25% between 2008 and 2010, Fitch said. While overall hotel performance may have begun to show signs of improvement with one year of positive growth, many hotel properties, especially limited-service hotels located in secondary and tertiary markets, continued to report a lower NOI in 2010 than in 2008.
“The daily reset of overnight rates make hotel properties the most vulnerable to performance declines,” said Fox.

On the other end of the extreme, apartment properties performed better, declining only 1% over the same two-year period, Fitch said. Property managers had been maintaining lower rents and offering concessions in an attempt to bolster occupancy, but some of these concessions are slowly going away.

Office and retail properties, which benefit from longer-term leases, experienced modest NOI declines of 4% and 3%, respectively, from year-end 2008 to 2010.