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CMBS Delinquency Rate Inches Above 3% to End 2022

January 23, 2023

• The CMBS delinquency rate increased 5 bps in December to end the year at 3.04%. After reaching a post-COVID low of 2.92% in September 2022, the delinquency rate notched upward for three consecutive months.
• We anticipate the delinquency rate being more volatile, given the challenging macro environment. This reflects both heightened market volatility and a growingly unfavorable landscape for lenders in refinancing loans at higher rates and likely lower asset valuations as cap rates rise and the real potential that property-level cash flows decline.
• December’s delinquency rate is still 727 bps lower from its peak of 10.31% in June 2020 during the height of lockdowns during the pandemic.
• The CMBS special servicing rate was down 3 bps in December to end the year at 5.17%; this follows four consecutive monthly increases, including a 23 bp increase in November.
•  While the SS rate remains well below its high of 10.48% (in September 2020), the height of the pandemic, higher benchmark rates, and the real risk of an economic slowdown suggest asset valuations may be on the decline and the potential for more loans to be transferred to SS in 2023 than seen to date.

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