January's CMBS Delinquency Climbs to 8.1% Led by Office Distress

What Actually Happened

Meanwhile, the broader distress metric - which includes both delinquent loans and those that are current but under special servicing - rose to 10.7% from 10.4%.

Office loan delinquencies jumped 156 basis points to 13.9%. This spike was largely driven by the One New York Plaza loan ($835 million in ONYP 2020-1NYP). That loan had been handed over to a special servicer because an imminent monetary default was expected just before its January 2026 maturity, at which point it became a nonperforming matured balloon. Subsequently, the servicer executed a modification that included an extension.

The Big Loans Making Headlines

Two sizable office loans accounted for the bulk of January's increase.

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If the borrower meets the terms of the modification agreement, the loan is expected to be returned to the master servicer.

Next is Worldwide Plaza ($235 million across four KBRA-rated conduits), which became 30 days delinquent after missing its payment in December. According to the servicer, a new holder of the mezzanine note had sped up the remaining mezzanine loan and arranged a UCC sale for the middle of January.

In total, loans totaling $2.3 billion entered the distress category in January. Among these, 52.7% ($1.2 billion) faced either an impending or actual maturity default.

Not All Bad News

Here is where the story gets a little less gloomy.

While offices keep struggling, retail actually had a decent month. Retail's distress rate fell 54 basis points thanks to three loans with an average size of $130.2 million being handed back to the master servicer. After ground-lease disputes were settled, Augusta Mall ($159 million across two KBRA-rated conduits) returned to the master servicer.

The Mall of New Hampshire, carrying $150 million in two KBRA-rated conduits, came back once an extension agreement was finalized. Similarly, St. Louis Premium Outlets, with $81.6 million across three KBRA-rated conduits, returned after the borrower pushed the loan's maturity to October 2027.

The broader picture still shows pressure. Total distressed loans now stand at $34.9 billion, up from $34.2 billion in December, while delinquent loans alone reached $26.5 billion. More than half of January's newly distressed loans - 52.7% - involved an imminent or actual maturity default, underscoring the refinancing challenges many borrowers face as older loans come due.

This persistent stress, particularly in the office sector, reflects ongoing low occupancy rates and tighter lending conditions that have made it difficult for property owners to secure new financing. The overall distressed loan volume remains elevated, suggesting that the market may see further downgrades and special servicing activity in coming months.

The structural shift toward hybrid and remote work continues to depress demand for traditional office space, while higher interest rates have made refinancing more expensive. Many borrowers are now forced to either inject additional equity or hand over properties to lenders, prolonging the cycle of distress across CMBS portfolios.

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