Commercial mortgage lenders are having themselves a worry-free summer this year. According to the most recent data from the California Mortgage Bankers Association, the statewide delinquency ratio for commercial real estate loans dropped to a minuscule 0.2 percent in the second quarter.

The delinquency ratio was an already extremely low 0.4 percent in the first quarter, and was the same during the second quarter of 1999.

In dollar terms, the low percentage means that as of June 30, 2000, out of $22.2 billion in outstanding commercial loans in California, loans representing a paltry $38 million were two or more months behind in payments.

“This is an extremely healthy commercial real estate market,” said Peter Ulrich, a consultant with the CMBA. “There are no signs of overbuilding, and that means that mortgage lenders are not seeing any write-offs.”

According to Ulrich, the delinquency rate for L.A. County mirrors that of California fairly closely, given the large size of the local real estate market.

In fact, one $25 million loan for an unspecified marina project in L.A. County (the CMBA does not disclose details about individual loans and lenders) accounts for the bulk of the $38 million in delinquent loans in California. If not for this particular loan, the delinquency ratio would be pretty much nil.

As of June 30, out of $3.7 billion in warehouse and industrial property loans statewide, not one payment was more than a month late, and out of $7.2 billion in loans for apartment buildings, just $300,000 was in arrears.

Thus far, the longest economic expansion in U.S. history has not led to speculative overbuilding as good times did during the expansion of the 1980s.

“We are seeing very little new construction, specifically in the large metropolitan areas,” said Ulrich. “The new projects that are being planned now are in many cases still a few years away from coming online, so we expect that the low delinquency ratio will stay low for the foreseeable future.”

In Los Angeles County, in spite of strong job growth and business expansion over the last few years, commercial building has remained relatively flat. After a big jump from 1997 to 1998 in the value of commercial and industrial construction permits issued for L.A. projects, the last two years have seen only modest increases in the value of such permits.

With the prospect of an economic slowdown looming, developers are apparently not in the mood to repeat their past mistakes and go on a building binge to take advantage of the tight market.