CMBS Office Delinquencies Mask Growing Divide Between Trophy and Aging Assets
Rising delinquency rates in office-backed commercial mortgage-backed securities are generating alarm across fixed income markets, but a new report from Janus Henderson argues that headline figures are obscuring a far more nuanced story — one defined by a deepening divide between trophy office assets and older buildings struggling with weaker tenant demand and lasting shifts in workplace behavior.
Portfolio Managers John Kerschner and Nick Childs and Client Portfolio Manager Dennis Deane find that office delinquency rates within CMBS have climbed from 1.6% in 2022 to more than 12% in 2026, driven by higher financing costs, refinancing pressures and the long-term effects of remote and hybrid work. Yet the report — CMBS: A Tale of Two (Office) Markets? — argues that those aggregate figures fail to capture significant differences in performance among individual properties.
“In an environment where dispersion continues to widen, active CMBS management is less about avoiding office altogether and more about owning the right office exposure,” Kerschner, Childs and Deane wrote.
New York City emerges as one of the clearest illustrations of the divergence. Attendance levels in the city’s top office buildings have recovered to more than 70% of pre-pandemic levels, the report finds, placing New York among the strongest-performing office markets nationally. Leasing activity in the city reached 8.9 million square feet in the first quarter of 2026 — a pace consistent with last year’s record levels and above long-term averages. Trophy assets have maintained substantially lower vacancy rates than Class B properties, reflecting continued tenant demand for newer, amenity-rich buildings.
The managers also highlight office-to-residential conversions and limited new construction as factors that could improve fundamentals for prime assets over time. The divergence is also influencing how investors evaluate CMBS structures. Single-asset, single-borrower transactions, known as SASBs, may offer more targeted exposure to higher-quality properties, while diversified conduit structures can make it harder to avoid weaker office collateral.
Beyond office, the broader CMBS market continues to demonstrate competitive performance. The Bloomberg U.S. Investment Grade CMBS Index returned 5.66% annualized over the three years ended May 8, 2026, outpacing the 5.06% return for investment-grade corporate credit, while delivering lower volatility, shorter duration and higher average credit quality, the reported noted.
Senior CMBS bonds have also historically shown lower correlation to equities than many other credit sectors, with the index maintaining a negative correlation to the S&P 500 over the past decade.
