- The CMBS special servicing rate reached 9.89% in December 2024, up 311 bps YoY.
- Office properties saw the highest servicing rate at 14.78%, continuing its dramatic rise from 2023.
- Mixed-use properties also significantly increased, rising to over 11% for the first time since 2013.
- Retail and multifamily sectors were distressed, though industrial remained stable with a sub-1% special servicing rate.
The commercial mortgage-backed securities market is showing signs of distress as special servicing rates reach their highest point in four years, as reported by GlobeSt.
By The Numbers
According to Trepp, the overall rate hit 9.89% in December, up a significant 311 bps compared to 2023. This rise indicates growing CRE challenges, particularly within certain property types, like office and mixed-use assets.
The 9.89% special servicing rate is the highest since 2020, marking a stark shift in the CMBS market. Special servicing refers to the management of distressed loans, and this uptick signals a growing number of commercial properties are facing financial strain.
The increase is most notable in office buildings, which posted a 14.78% special servicing rate, the highest among property types. This represents a 15-bps MoM increase and an alarming 633-bps jump over the past year.
If this trend continues, it could reach levels not seen since the aftermath of the global financial crisis of 2008.
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Sector by Sector
Mixed-use properties also saw a dramatic surge in distress, with the special servicing rate rising by 181 bps from November to December—the first time since 2013 that the mixed-use rate surpassed 11%.
Meanwhile, the retail sector posted the second-highest special servicing rate at 11.67%, despite a slight MoM decrease. While multifamily properties saw an increase as well, it was lower than other sectors at 8.72%, up from 7.37% in November.
On a more positive note, the industrial sector remains resilient, with its special servicing rate sitting at just 0.56%. While this is a slight increase from 2023, it remains among the lowest across all property types.
Special Servicing Transfers
In December, $2.3B worth of loans were transferred into special servicing, with mixed-use properties accounting for the largest share at 22.0%.
Office properties were close behind at 21.8%. The largest transfer involved the $1.07B Workspace Property Trust Portfolio, which faced an imminent default before its July 2025 maturity date.
Other significant transfers included a $519.5M loan for Yorkshire & Lexington Towers, two multifamily towers in Manhattan.
Looking Ahead
With the special servicing rate hitting its highest level in years, many wonder how long this trend will persist.
The rising rates in office and mixed-use properties point to broader challenges in CRE. The continued strain on these sectors, coupled with rising interest rates and economic uncertainty, suggests the market could face more turmoil in the coming months.
