KBRA releases research analyzing the magnitude and change in distress rates by property type nationally and across the largest 20 metropolitan statistical areas (MSA) in U.S. private-label CMBS 2.0 between September 2023 and September 2024. The CMBS 2.0 distress rate, which includes both delinquent and current but specially serviced loans, has continued to trend higher, ending September 2024 at 8.5%, up 1.5% year-over-year (YoY). However, the distress has manifested differently across the various markets. Among the top 20 U.S. MSAs by balance in CMBS 2.0, individual market distress rates ranged from a high of 22.1% to a low of 0%. In addition, these MSAs had very different YoY changes. For example, San Francisco, which had the highest distress rate, saw a jump of 794 basis points (bps)—while Chicago, the market with the second-highest distress rate at 20.8%, actually experienced a decline of 181 bps.

Our study population, utilizing Trepp data, includes nearly $600 billion of collateral across KBRA-rated and nonrated conduit, single-borrower (SB), and large loan transactions.

For the most recent trends in KBRA-rated CMBS transactions, see CMBS Loan Performance Trends: September 2024.

Key Takeaways

• The national distress rate increased to 8.5% in September 2024, from 7% in September 2023.
• By property type, lodging’s national distress rate of 7.2% as of September 2024 was fairly flat YoY while office (12.8%), retail (11%), mixed-use (9.5%), and multifamily (5.7%) all had increases.
• The distress rate across the 20 largest markets was 9%, which is slightly above the national rate of 8.5%.
• Fifteen of the top 20 MSAs had an increased distress rate YoY in September 2024, while four were down and one was flat.
• The five MSAs with the highest distress rates, all in the double digits, include San Francisco (22.1%), Chicago (20.8%), Philadelphia (16%), Houston (13.7%), and Washington, D.C. (13.2%).
• The five MSAs with the lowest distress rates, all 2% or less, include Urban Honolulu (0%), Boston (0.9%), Orlando (1.7%), Phoenix (1.9%), and Las Vegas (2%).
• Across the major property types, the highest distress rates occurred in the following MSAs: lodging, multifamily, and retail in San Francisco (73.6%, 49.1%, and 24.2%, respectively), mixed-use in Atlanta (79.6%), and office in Philadelphia (31.8%).

Click here to view the report.

Related Publications

• KBRA-Rated CMBS, Freddie Mac, CRE CLO, and SFR Exposure to Hurricane Milton
• Data Center MEP: More Than Meets the Eye
• CMBS ARAs: Trending Higher
• KBRA CMBS Loss Compendium Update: June 2024
• Appraisal Values of Distressed Loans Highlight CMBS Stress
• CMBS Loan Performance Trends: September 2024
• CMBS Trend Watch: September 2024

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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