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**CMBS Special Servicing Rate Hits Record High in October**
The CMBS (Commercial Mortgage-Backed Securities) special servicing rate surged once again in October, reaching a historic high of 10.84%, according to the latest data from Trepp. This 19 basis point increase was driven by a nearly $1 billion rise in the balance of loans in special servicing, which totaled $64.7 billion. At the same time, the overall balance of loans in the market decreased by $2.1 billion.
Among property types, the mixed-use category experienced the most significant increase, with a 145-basis point jump to 13.40%—marking a 12-year high. This follows a 130-basis point increase in September, continuing a worrying trend for this asset class.
The lodging sector also saw a notable increase, with its special servicing rate rising 70 basis points to 10.81%, its highest level since March 2022.
The office sector set a new record as well, with its special servicing rate climbing 39 basis points to 17.30%. This marks the first time office special servicing has surpassed the 17% threshold.
Conversely, retail was the only sector to post a significant decrease, falling 37 basis points to 11.57%. Other property types, including multifamily, industrial, and “other,” saw only modest movements, with rates fluctuating by no more than 12 basis points during the month.
According to Trepp, the two largest loans transferred to special servicing in October were both in the mixed-use category. The most notable was a $593.6 million loan tied to 650 Madison Avenue in Manhattan, which entered special servicing due to a payment default at the request of the borrower.
This continued rise in special servicing rates highlights ongoing challenges in the commercial real estate market, particularly in office and mixed-use sectors, as economic pressures and changing work habits reshape the industry landscape.
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