CMBS Distress Rate Dips for Second Straight Month
At CRED iQ, we’re committed to delivering timely, data-driven insights into the commercial real estate market. Our latest analysis reveals a notable shift showing that the overall distress rate across commercial mortgage-backed securities (CMBS) has dropped for the second consecutive month, declining by 20 basis points (bps) to 10.6 percent.
This encouraging trend is accompanied by modest improvements in our core distress metrics, signaling potential stabilization in certain segments of the market. However, a closer look at property types reveals a tale of divergence — particularly between retail and hotel — offering critical takeaways for investors and stakeholders.
Our research team tracks two key indicators of distress: delinquency rates and special servicing rates. In our latest report, the delinquency rate edged down from 8 percent in March to 7.9 percent, while the special servicing rate saw a more significant 40-bp reduction, landing at 9.7 percent.
A year ago, these figures stood at 5.4 percent and 7.4 percent, respectively, underscoring how much the CRE landscape has evolved. These month-over-month improvements suggest that, while challenges persist, the market may be finding its footing in select areas.
Among property types, the office and multifamily segments remain the most distressed, though both posted relatively flat results. Office continues to lead the pack at 19.2 percent (down 10 bps from March), while multifamily eased slightly to 12.9 percent (also down 10 bps). These incremental declines hint at resilience, but the broader distress levels in these sectors still warrant close attention.
The real story this month lies in the contrasting fortunes of retail and hotel. Retail, which had been neck and neck with the hotel sector in March, delivered a standout performance — its distress rate plummeted 210 bps to 8.6 percent. This marks the fifth consecutive month of improvement for the sector and the largest drop in that streak. Factors such as adaptive reuse, strong consumer spending and successful lease negotiations may be driving this positive momentum, a trend we’ll continue to monitor.
Meanwhile, the hotel segment moved in the opposite direction, with its distress rate climbing 130 bps to 11.5 percent. This uptick brings hotel closer to overtaking multifamily as the second-most distressed property type. Rising operational costs, shifting travel patterns and maturing loans could be contributing to this increase, making hotels a focal point for our next analysis.
Industrial and self-storage, as expected, remain bright spots. Industrial held steady at an impressively low 0.5 percent distress rate, while self-storage shaved 20 bps to 1.8 percent. These segments continue to demonstrate stability amid broader market fluctuations.
Payment status: a mixed picture
Digging deeper into payment statuses across approximately $55.6 billion in CMBS loans, we found:
• $10.3 billion (18.5 percent) are current.
• $14 billion (25.2 percent) are delinquent (including those within grace periods).
• $31.3 billion (56.2 percent) have passed their maturity date, with 20 percent performing and 36.3 percent nonperforming.
These figures are largely unchanged from March, suggesting a steady, if uneven, state of payment performance across the portfolio.
Our methodology
CRED iQ’s distress rate is a comprehensive measure that combines delinquency (30-plus days past due) and special servicing activity, encompassing both performing and nonperforming loans that fail to pay off at maturity. Our analysis focuses on CMBS properties securitized in conduits and single-borrower large loan structures, while we track Freddie Mac, Fannie Mae, Ginnie Mae and CRE CLO metrics separately for a holistic view of the market.
Mike Haas is the founder and CEO of CRED iQ.
