A surge in commercial mortgage-backed securities delinquencies is rattling the office sector, with June marking a new record high for troubled loans. According to Trepp, the office delinquency rate soared to 11.08% in June, surpassing previous peaks of 11.01% in December 2024 and 10.70% in July 2012. This sharp rise—up 49 basis points from May—underscores the ongoing volatility in the sector.
The office market’s distress has been building over the past year. Twelve months ago, the delinquency rate stood at 7.55%. It climbed to 10.83% six months ago, dipped to 9.76% three months ago, then rebounded to 10.28% in April and 10.59% in May, before reaching its current high, Trepp reported.
Retail properties followed as the next most troubled asset class, with a 7.06% delinquency rate in June. That figure compares to 6.42% a year earlier, 6.57% six months ago, 7.82% three months ago, 7.12% in April, and 6.99% in May.
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Lodging properties came in third, posting a 6.81% delinquency rate. The sector’s rate was 6.32% a year ago, 6.92% six months ago, 7.19% three months ago, 7.85% in April, and 6.39% in May, according to Trepp.
Multifamily delinquencies reached 5.91% in June, after registering 6.11% in May, 6.57% in April, 5.44% three months ago, 4.18% six months ago and 2.36% a year earlier.
Industrial properties continued to demonstrate resilience, maintaining the lowest delinquency rate among major property types. As previous GlobeSt.com reporting has noted, the industrial rate was just 0.62% a year ago, 0.32% six months ago, 0.60% three months ago, 0.50% in April, 0.48% in May and 0.51% in June.
Across all property types, the overall CMBS delinquency rate edged up to 7.13% in June, a five basis point increase from May’s 7.08%. The rate was 7.03% in April, 6.65% three months ago, 6.57% six months ago and 5.35% a year ago, according to Trepp.
Looking at loan performance more broadly, Trepp found that 91.40% of loans were current in June. The remainder included 0.28% that were 30 days delinquent, 0.39% 60 days delinquent, 0.59% 90 days delinquent, 1.58% classified as performing matured balloon loans, 2.25% as non-performing matured balloon loans, 2.63% in foreclosure and 0.88% as real estate owned.
Trepp attributed June’s overall rise in the delinquency rate primarily to a shrinking balance of outstanding loans, rather than a significant increase in delinquent loans. The delinquency balance remained relatively flat, but the denominator—the total loan balance—declined, pushing the percentage higher. About $4.2 billion in loans were cured, while $4.1 billion became newly delinquent, resulting in a modest net improvement of $0.1 billion.
However, this trend did not hold for the office or mixed-use sectors. Office properties saw $1 billion in loans cured, but $1.8 billion became newly delinquent, resulting in a net deterioration of $0.8 billion. Mixed-use properties, for which detailed data were not available, experienced $1.6 billion in loans cured and $500 million becoming delinquent, for a net improvement of $1.1 billion, according to Trepp.
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