CMBS Delinquencies Dip to 7.7%, But Distress Ticks Up as Industrial Weakens: KBRA 

The delinquency rate for KBRA-rated U.S. private label commercial mortgage-backed securities (CMBS) declined slightly to 7.7% in December, down from 7.8% in November. However, the overall distress rate—which includes both delinquent loans and those that are current but specially serviced—edged up to 10.6% from 10.5%, according to KBRA’s latest loan performance report. 

The December data reveals divergent trends across property sectors. Lodging posted the largest monthly increase in delinquencies, rising 37 basis points, yet simultaneously saw the most significant improvement in its distress rate, which fell by 33 basis points. Conversely, the industrial sector—long a bastion of stability—recorded the second-highest increases in both delinquency and distress rates for the month, signaling potential headwinds for the asset class. 

In total, $1.3 billion in loans were newly classified as distressed in December. Of these, 40.1% ($524.3 million) were triggered by imminent or actual maturity defaults. The retail sector accounted for the largest share of fresh distress at 26.6% ($346.9 million), followed by office at 21.6% ($281.9 million) and multifamily at 17.8% ($232.3 million). 

Despite the broader uptick in distress, the office sector offered a rare bright spot, with its delinquency rate falling 54 basis points to 11.8%. Meanwhile, the “other” property category saw its distress rate jump 75 basis points due to a cluster of loans becoming delinquent or transferring to special servicing. 

KBRA’s report analyzes a $334.8 billion rated universe of U.S. private label CMBS, covering conduit, single-asset single-borrower (SASB), and large loan (LL) transactions.