Office CMBS Loan Distress Rate Climbs to Record 19.3%

As part of our monthly distress update, the CRED iQ research team evaluated payment statuses reported for each loan securitized by commercial mortgage-backed securities (CMBS) financing along with special servicing status.

The CRED iQ overall distress rate fell by 70 basis points  (bps) in February to 10.8 percent, breaking a streak of four record highs through January’s print. 

CRED iQ’s other distress metrics also notched month-over-month reductions. The CRED iQ delinquency rate fell from 8.9 percent in the January print to 8 percent in February. The CRED iQ special serving rate shaved 20 points and now stands at 10.1 percent. One year ago, delinquency rates were 5.4 percent, and special servicing rates were 7 percent. 

But office buildings continue to struggle. The office sector in February nearly matched its December distress increase, which was the largest by far in 2024. Office missed that mark by only 10 bps, tacking on 160 bps since January to reach a record 19.3 percent distress rate. Office continues to bolster a commanding lead as the most distressed property type.

The multifamily segment’s overall distress rate continued to climb modestly in January (up 40 bps), and February added another 10 bps to land it at 13 percent. Multifamily earned a distant second place in the distressed property type rankings 

The retail and hotel segments continue to battle for third place while posting modest changes. Retail finished February with a distress rate of 10.7 percent, down 10 bps from January, to hold onto third place, while the hotel sector ended the month at 10.2 percent, a 20 percent monthly dip. Retail has notched three successive months of modest distress rate decreases.  

As predicted in our last report, the self-storage print of 14.2 percent was misleading and due to a 16-property, $2 billion portfolio in Manhattan’s Chelsea section reaching maturity. The service commentary indicates the first of three one-year extension options is being exercised. Accordingly, self-storage normalized back down to 2 percent in the latest data. 

Industrial also normalized with a 110 bps decrease to reach a familiar territory: sub-1 percent at 0.5 percent. 

With payment statuses of these CMBS loans, the nonperforming matured category saw a decrease of 370 bps to 36.6 percent. The current category saw an increase of 380 bps to 18.6 percent. All other categories saw more modest changes since our previous print.  

Combining the categories of current with late but in the grace period and late but less than 30 days delinquent, this “wider current” metric continued to grow at 25.8 percent, a 310 bps favorable swing. 

Combining performing matured with nonperforming matured, January saw a significant decrease from 61.7 percent to 56.4 percent in February.

Analysis methodology

CRED iQ’s distress rate factors in all CMBS properties that are securitized in conduits and single-borrower large loan deal types. CRED iQ tracks Freddie Mac, Fannie Mae, Ginnie Mae and CRE CLO loan metrics in separate analyses.

CRED iQ’s distress rate aggregates the two indicators of distress — delinquency rate and specially serviced rate — yielding the distress rate. The index includes any loan with a payment status of 30-plus days delinquent or worse, any loan actively with the special servicer, and includes nonperforming and performing loans that have failed to pay off at maturity.

Mike Haas is the founder and CEO of CRED iQ.