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.” 

The volume of maturing CMBS loans is “quite significant,” Trepp says in a new report. Given this volume as well as recent history, the firm expects to see an increase in loan modifications. 

About $131.3 billion in outstanding, non-defeased CMBS loans that are current on payments are scheduled to mature by the end of this year, according to Trepp. That tally rises to $321.4 billion through 2027, with about 27% consisting of maturing office loans. 

2023 saw a dramatic rise in CMBS loan modifications, due largely to lower property values and a higher interest rate environment. “Instead of refinancing old loans into new ones as loans came up on their maturity dates, often loans would undergo modifications, which mainly include extensions and any other amendments to loan terms,” Trepp reports. 

Already in 2024, the first quarter saw $2.5 billion in newly modified loans, and April saw another $1.1 billion in CMBS loan modifications. “CMBS delinquency rates are also continuing to climb, and unless interest rates are able to come down some by the time these loans hit their maturity dates, more modifications could be expected to pop up in these figures as 2024 continues,” according to Trepp.