CMBS Delinquencies, Distress Increased in July
Although retail assets have been somewhat harder hit, distress for retail and office properties is lower than a year ago.
The CMBS sector is seeing both increasing 30-plus-day delinquencies and rising distress, according to a new report from KBRA on U.S. commercial mortgage-backed securities loan performance trends over the July 2026 servicer reporting period.
Overall delinquencies increased by 29 basis points to 7.8 percent, or $26.1 billion, in July. This rise was driven by an increase in conduits that was partially offset by a decline in the single borrower/large loan category.
Concurrently, the distress rate climbed to 10.1 percent, as both conduit and SB/LL saw minor increases in July. KBRA noted, however, that this rate remained 49 basis points lower year-over-year. (Distress was defined as delinquent plus current-but-specially-serviced loans.)
READ ALSO: Working Out Distressed Office—One Square Foot at a Time
Breaking those figures down by product type, the office distress rate declined 33 basis points to 17.2 percent in July, driven mostly by the return to the master servicer of 3 Park Avenue ($182 million across three conduits) and the resolutions of Bank of America Plaza ($400 million across four conduits) and Gateway Center ($91.8 million in JPMCC 2013-C10).
On the other side of the office ledger, 1812 N. Moore in Arlington, Va., with $172.8 million across two conduits, and 675 Creekside Way in Campbell, Calif., with $83.4 million across three conduits, both fell more than 30 days delinquent.
The retail distress rate increased by 91 basis points to 9.6 percent, driven primarily by three loans transferring to the special servicer: Augusta Mall in Augusta, Ga. ($155.2 million across two conduits); Yorktown Center in Lombard, Ill. ($120.5 million in CG-CCRE 2014-FL1); and Harbor Place in Baltimore ($67.5 million in UBS-BB 2013-C5). Despite this July increase, KBRA noted, the distress rate for retail assets is down 2 basis points year-over-year.
Difficulties by the Bay
The report highlights what KBRA calls the most notable development among the SASB and LL deals it rates. After several months of due diligence, Prado Group and Presidio Bay Ventures withdrew their bid to buy Westfield San Francisco Centre.
The collateral asset is a 1.1 million-square-foot portion of a 1.4 million-square-foot mixed-use retail property in downtown San Francisco. Known as Emporium Centre San Francisco, the property secures a $558 million whole loan that was sent to special servicing in July 2023 for monetary default, KBRA reported.
The report is based on KBRA’s observations of its $343.8 billion rated universe of U.S. private-label CMBS, including conduits, single-asset, single-borrower and LL transactions. Collectively, these transactions are collateralized by $9 billion fully defeased and $334.8 billion non–fully defeased loans.
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