Kroll Bond Rating Agency (KBRA) predicted “a record year” for CMBS in 2025, with issuance and special servicing volume expected to reach “peak levels not seen since the global financial crisis” of 15 years ago. At the same time, though, KBRA warned that “there will continue to be credit challenges on outstanding CMBS.”
The delinquency and special servicing rates for CMBS loans are expected to continue on their upward trajectory, KBRA said in a new report. “Negative rating actions doubled year-to-date (YTD) in KBRA-rated CMBS transactions compared to 2023 and our expectations are for further elevated numbers of downgrades next year,” the report stated.
Additionally, with approximately 32% of the KBRA-rated maturing loans in 2025 taking place in the office sector, rating pressure will continue due to the sector’s valuation declines compounded by their refinancing challenges.
Overall, KBRA reported, “With the expected dollar volume growth of the specially serviced loans, we could see the special servicing rate surpass that of the prior peak of 10.5%, which came in the wake of the pandemic—the main difference is that the volume of specially serviced loans decreased fairly rapidly after peaking during the pandemic. This time around, we expect longer resolution periods that will push volumes higher.”
Read More: Outstanding CMBS Expected to Face “Credit Challenges” in 2025
