Special Servicing Rates Climb as Distress Grows

Special servicing rates hit record highs in office and mixed-use sectors as CMBS distress deepens across US markets.

November 11, 2025

The overall CMBS special servicing rate rose to 10.84% in October, marking a 12-month high and continuing an upward trend in commercial real estate distress.
Mixed-use properties saw the largest monthly increase, jumping 145 basis points to 13.40%, the highest level in over a decade.
Office special servicing rose to a record 17.30%, breaking the 17% threshold for the first time, while lodging also saw a significant rise to 10.61%.
The retail sector was the only property type to see a decline, falling to 11.57%.

Key Takeaways

A Steady Climb in Distress

October marked another month of rising distress in the commercial mortgage-backed securities (CMBS) market. According to Trepp, the overall CMBS special servicing rate rose 19 basis points month-over-month to 10.84%. That increase was largely attributed to a nearly $1B spike in loans transferred into special servicing—pushing the total to $64.7B—while the total CMBS balance declined by $2.1B.

CHART 1: CMBS SPECIAL SERVICING RATE (OCT 2024 – OCT 2025)

Mixed-Use Surges to 12-Year High

Mixed-use properties saw the most dramatic increase in distress levels. The sector’s special servicing rate soared to 13.40%, up 145 basis points from September, and 275 basis points over the past two months—marking the highest rate since 2013.

Notably, two mixed-use loans were the biggest new transfers in October:

650 Madison Avenue ($593.6M): Transferred due to a payment default; now more than 30 days delinquent. Appraised at $950M, down from $1.1B at securitization.
Columbus Square Portfolio ($359.8M): Transferred for imminent maturity default; 60 days delinquent and due to mature in August 2027.

Together, these loans accounted for nearly 40% of the month’s new special servicing volume.

TABLE 1: SPECIAL SERVICING RATE BY PROPERTY TYPE (ALL VINTAGES)

Office Rate Breaks 17% Barrier

Office properties continued their slide, reaching a new record high of 17.30% in October—up 39 basis points from the prior month. That’s a 336 basis point jump over the last six months, highlighting persistent challenges facing the office sector amid hybrid work trends and refinancing pressures.

Lodging and Multifamily Edge Up

Lodging rose 70 basis points to 10.61%, the highest since March 2022, driven by weakening fundamentals in select urban and resort markets.
Multifamily inched up to 8.32%, continuing a volatile pattern seen over the past several months.

Retail Sees Some Relief

In contrast to the broader market trend, retail special servicing dropped by 37 basis points to 11.57%, indicating modest improvement or stabilization in that sector.

CMBS 1.0 vs. 2.0+

The generational breakdown of CMBS shows older vintages under heavier stress:

CMBS 1.0 special servicing rate surged to 65.03%, up from 23.51% a year ago.
CMBS 2.0+ stood at a more modest 10.74%, although still trending upward from 9.05% last year.

TABLE 2: SPECIAL SERVICING RATE BY PROPERTY TYPE CMBS 2.0+

Why It Matters

The continued rise in special servicing rates—particularly in the office and mixed-use sectors—highlights the lingering challenges in CRE finance. Borrowers are increasingly struggling to meet payment obligations, while lenders face growing exposure to maturing debt amid tight capital markets.

What’s Next

Expect more volatility ahead, especially as large loans approach maturity with limited refinancing options. The sharp increase in transfers tied to mixed-use and office signals more stress to come, with special servicers likely playing a growing role in workout negotiations as we head into 2026.