- The CMBS special servicing rate reached 8.46% in August, a 3-year high, rising steadily throughout 2024.
- Office properties hit an 11-year peak in special servicing at 11.91%, driven by large transfers like Beacon Capital Partners’ $370M loan for AMA Plaza in Chicago.
- Mixed-use loans shot up 66 bps to 9.59%, also reaching an 11-year high. Meanwhile, multifamily special servicing rose to 5.71%, the highest level in 9 years.
- Office, mixed-use, and multifamily loans made up 91% of the $2.65B in new special servicing transfers in August.
The commercial mortgage-backed securities (CMBS) special servicing rate rose to 8.46% in August 2024, according to Trepp, reflecting an increase in distressed assets across CRE sectors.
This marks the highest CMBS special servicing rate in three years and a steady rise from 6.67% recorded a year ago, as reported in Bisnow. The rise has been driven primarily by the office sector, where high vacancy rates and maturing loans have led to a surge in distressed properties.
Office Problems
Office properties, in particular, have faced mounting challenges, with the special servicing rate reaching 11.91%—the highest level since April 2013.
In August alone, $1.4B worth of office loans were transferred to special servicing, including Beacon Capital Partners’ $370M loan for the AMA Plaza in Chicago. Beacon Capital warned of an imminent monetary default on the property after struggling to meet both loan and tax payments.
Another notable transfer involved a $335M mixed-use loan for Times Square Plaza, anchored by ABC’s Good Morning America studio. The building’s owner, Tamares Group, has been exploring refinancing options as it faces the departure of key tenants like GMA and Nasdaq.
Mixed-Use Struggles
Mixed-use properties saw similar pressure, with the special servicing rate for these assets increasing by 66 bps to 9.59%, an 11-year high.
This rise parallels the office sector’s struggles, with many mixed-use assets anchored by office tenants facing declining occupancy and impending loan maturations.
Multifamily, Retail Stress
Meanwhile, the multifamily sector saw its special servicing rate reach 5.71%, the highest level in nine years. Retail and lodging showed smaller growth, with retail’s special servicing rate inching up to 10.92% as lodging rose to 7.42%.
Industrial properties, by contrast, remained relatively stable, with a minimal decline in special servicing.
Distressed Concentration
In August, $2.65B in CMBS loans were transferred to special servicing, with office properties accounting for 52% of the total. Mixed-use and multifamily properties made up 23% and 16% of the new balance, respectively.
Together, these three asset classes represented 91% of the new distressed loans, underscoring the continued challenges in the office, multifamily, and mixed-use sectors as market conditions evolve.
