CMBS Special Servicing Spike Biggest Monthly Leap in 4 Years

CMBS Special servicing rates spiked significantly in April, marking the largest month-over-month rise in almost four years.
May 16, 2024
CMBS Special servicing rates spiked significantly in April
  • Nationally, special servicing on CMBS loans surged 80 bps to 8.11% in April.
  • Retail properties shot up 105 bps to 10.85%, while office rates rose 53 bps to 10.84%, passing 8% for the first time since 2021.
  • Loan value transfers of $5.46B to special servicing from office, retail, and multifamily highlighted dropping debt service coverage ratios.
Key Takeaways

April’s surge in CMBS special servicing rates—particularly in retail, office, and multifamily—indicates mounting difficulties in those sectors, according to Trepp.

Roaring Rate Surge

Nationwide, special servicing on CMBS loans spiked by 80 bps to 8.11% from March to April. Retail and office rates shot up to 10.85% and 10.84%, respectively. These sectors haven’t jumped above the 8% mark since 2021, and are also above 2020’s peak pandemic levels.

Loan Value Transfers

In April alone, $5.46B in loan value moved to special servicing. Office, retail, multifamily, and other sectors accounted for 98% of these transfers, with two loans totaling over $2B in the mix. Changes to debt service coverage ratio (DSCR) and occupancy rates indicate difficulties in maintaining loan performance.

The infamous Parkmerced loan in CA, which has faced difficulties since 2023, made up a substantial portion of the transferred loan value. The IMC Portfolio loan, scheduled to mature in December 2024, also contributed $975M.

Why It Matters

Investors and lenders in CRE should closely monitor CMBS trends, as high special servicing rates indicate potential defaults. These developments underscore the complexities of managing large portfolios, especially in the face of evolving economic conditions and market uncertainties.

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