The delinquency rate for Commercial Mortgage-Backed Securities (CMBS) in the office sector reached 13.2 per cent in August 2026. This marks the highest level since at least 2019 and represents a significant increase from 8.1 per cent in July 2024. The current office metric is approximately 1.6 times higher than the average rate of 8.2 per cent across all property types. This office metric also includes loans that are due but still performing. Without these, the actual default rate stands at 9.8 per cent.
The proportion of loans under special servicing also rose to 15.7 per cent, which is the highest value since 2019. In the previous year, this figure was 14.9 per cent, and in July 2024, it was 10.6 per cent. These figures cover office loans totalling US$189.6 billion, included in Conduit, Single-Asset Single-Borrower, and Commercial Real Estate Collateralized Loan Obligation (CRE CLO) transactions.
Main Drivers of Delinquency
The rise in default rates briefly slowed but continued with the largest increase between mid-2024 and mid-2025. From September 2025 to July 2026, office delinquency fluctuated between 11.5 per cent and 12.5 per cent before surging in August. Data reported so far for September shows delinquency exceeding 14 per cent and special servicing above 16 per cent. Conduit office loans remain the weakest CMBS segment with a 14.4 per cent default rate and 18.5 per cent under special servicing, compared to 10.7 per cent and 11.5 per cent respectively for Single-Asset Single-Borrower office transactions.
Loan maturities are proving to be the main driver of this trend. 71 per cent of the distressed office loan volume is attributed to a failed or impending refinancing event, not missed payments. Over the last twelve months, 51 per cent of office loans transferred to special servicing were still performing at the time of transfer. This occurred, on average, approximately eleven months prior to maturity, an increase from 42 per cent in the preceding twelve months. Borrowers and master servicers are increasingly transferring loans to special servicing early, before a payment default or a missed maturity date.
An example of this is One SoHo Square in Manhattan, which is secured by approximately US$469 million in CMBS notes and was transferred to special servicing at the end of August while still performing – almost two years before its maturity in 2028. CRED iQ examined 93 office loans transferred to special servicing between August 2024 and August 2025 in performing status and before maturity. By August 2026, 72 per cent of these loans had, at some point, become 60 or more days delinquent or matured without being repaid. In August, 43 per cent were still delinquent or matured unpaid, while only 15 per cent had returned to the master servicer and were performing again. Among loans that were already delinquent upon transfer, 92 per cent reached a seriously delinquent status.
Large Loans and Market Observations
Even fully occupied properties are not exempt from this distress, as several failed refinancings involve fully leased properties occupied by single tenants. Crossroads III in Sunnyvale, a US$209 million loan for a fully occupied property with Apple as the largest tenant, was once extended, went into special servicing in August, and received a default notice on 1 September. In Rockville, Maryland, the US$138 million GSK R&D Centre loan was transferred prior to its 2027 maturity because its sole tenant moved out, although the property still reports full occupancy.
- —Among performing loans transferred under US$100 million, 74 per cent eventually became delinquent.
- —11 per cent of these loans had returned to the master servicer by August.
- —For loans of US$100 million or more, the default rate was 63 per cent.
- —Approximately one third of these larger loans had returned to the master servicer by August, some after a period of delinquency.
For larger loans, early transfer seems to be an entry point for restructuring rather than a precursor to foreclosure. Examples include the Willis Tower in Chicago and 1211 Avenue of the Americas in New York, both of which were transferred in performing status and have since returned to the master servicer. The 2015 and 2016 vintages explain the caution, as ten-year office loans from these years were resolved at maturity at only 47 per cent and 44 per cent respectively on a balance basis, compared to 79 per cent and 76 per cent for other property types.
Distress in the 2016 office vintage increased by 35 percentage points within one year to 51 per cent of the balance volume. In downtown Indianapolis, the Salesforce Tower and the PNC Center (both originated on the same day in August 2016) matured on the same day, 1 September. The PNC Center went into special servicing days earlier and is now a non-performing, matured loan, while the Salesforce Tower is classified as a performing, matured loan. Over the next twelve months, approximately US$39 billion of office CMBS loans are due to mature. Of these, US$13.9 billion are not yet distressed but show warning signs, such as debt service coverage below 1.25, occupancy down by 10 or more points since securitisation, or a recent addition to the watchlist. Among the largest of these are 3 Bryant Park (US$1.13 billion, watchlisted in May) and 280 Park Avenue (US$1.08 billion, debt service coverage 0.72). If the experience of the last two years serves as a guide, many of these loans will enter special servicing long before a payment default.
