The overall distress rate for CMBS dropped for the second month in a row, according to CRED iQ, down 20 basis points to 10.6%. Four property categories saw lower distress rates; one was flat, and another had a higher distress rate.
As a reminder, CRED iQ considers distress a combination of delinquency and special servicing. The delinquency rate went from 8.0% in February to 7.9% in March; it was 5.4% in March 2024. The special servicing rate saw a 40-basis-point improvement from 10.1% to 9.7% and was 7.4% a year prior. The firm says the recent improvements suggest that “while challenges persist, the market may be finding its footing in select areas.”
Of the roughly $55.6 billion in CMBS loans, 25.2%, or $14 billion, were delinquent. As percentages of the total CMBS loans, 1.1% were late but in the grace period; 6.3% were late but less than 30 days delinquent; 4.1% were 30 days delinquent; 1.7% were 60 days delinquent; and 12% were at least 90 days delinquent. Also, 56.2%, or $31.3 billion, passed their maturity date. Of the last group, 20% were performing, and 36.3% were non-performing.
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Multifamily went from 13% in February 2025 to 12.9% in March. Office dropped 10 basis points, going from 19.3% to 19.2%. Retail slid from 10.7% to 8.6%, while self-storage distress eased from 2% to 1.8%. Industrial stayed flat at 0.5%. Hotel was the one property type in which distress grew, going from 10.2% to 11.5%.
CRED iQ noted that office and multifamily remain the most distressed types and that the slight declines “hint at resilience,” but that the levels are something investors should watch.
The report then focused on the difference between retail and hotel. The two had been “neck-and-neck” in January and February, and then they diverged. For retail, distress dropped by 210 basis points. That was the fifth consecutive month of improvement and the largest fall overall. CRED iQ speculated on potential causes for the improvement, which might include adaptive reuse, strong consumer spending, or successful lease negotiations.
Hotel distress, on the other hand, shot up 130 basis points. If the movement continued, the property type would gain ground on multifamily, which is currently the second-most distressed type. Again, the firm speculated on the potential factors causing the change: rising operational costs, shifting travel patterns, or maturing loans.
Overall, this second consecutive reduction in overall distress is a “cautiously optimistic signal for the CRE sector,” says CRED iQ.
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