KBRA Sees Record 2026 CMBS Issuance Ahead, but Distress and Downgrades Likely to Rise — Evening Brief – 11.24.25
KBRA’s 2026 CMBS Sector Outlook projects a year defined by both strong issuance and intensifying credit stress, as commercial real estate markets work through a multiyear adjustment cycle. The firm forecasts private-label CRE securitization volume to reach a post–global financial crisis high of $183 billion in 2026, an 18% increase over its full-year 2025 estimate. This follows a sharp 38% year-over-year jump in issuance during 2025, supported by moderating borrowing costs, steadier property fundamentals, and sustained investor demand across the capital markets.
Single-borrower deals are expected to represent more than half of next year’s volume, with CRE CLO issuance also set to rise year-over-year. Conduit issuance will grow as well and is likely to be dominated by five-year transactions, reflecting investor demand for shorter-duration exposure in a still-uncertain rate environment. With bank appetite for CRE lending remaining subdued, KBRA expects more loans to migrate into securitization channels—particularly as the market faces two major maturity walls: $525 billion in loans coming due in 2026 and another $587 billion in 2027.
Property-sector performance will remain uneven. Retail continues to benefit from solid sales growth and limited new supply, while office properties face another year of slow, uneven recovery due to hybrid work patterns and elevated vacancies. Industrial should stay resilient, supported by e-commerce and delayed rent growth catching up to market levels. Lodging performance is expected to remain generally stable. Multifamily fundamentals are bolstered by high homeownership costs and deteriorating affordability, though KBRA notes emerging pockets of credit stress, especially in oversupplied Sun Belt markets. Data centers will continue to enjoy strong demand tailwinds, and single-family rental performance should remain steady despite recent home-price softness.
Distress continues to build across CMBS. KBRA reports that the overall distress rate (30+ days delinquent plus current but specially serviced) reached 10.9% in October 2025, up from 9.3% at year-end 2024 and 6.7% at year-end 2023. Office distress climbed to 17.4%, more than doubling from 2023 levels. KBRA expects distress rates to keep rising into early 2026 before flattening later in the year as new issuance helps dilute the numerator.
CMBS downgrades were elevated throughout 2025, and while the pace is expected to level off in the second half of 2026, persistent weakness in office and growing multifamily stress will continue to put downward pressure on ratings.