Office Multifamily Distress Raises CMBS Servicing Rate

Loan Distress Surges

According to Bisnow, several major office-backed CMBS loans moved to special servicing in March, pushing the national rate to 11%. This marks the highest level in over a year and reflects a near one-point increase year over year.

Distress did not spread evenly across CRE sectors. Office and multifamily rates each rose by more than 40 basis points. In contrast, lodging and mixed-use loans both declined.

Major Loans Transition

Office assets led the increase, accounting for more than half of the $2.9B in CMBS debt transferred in March. The biggest transfer was the $599M BMR Pool loan secured by a six-property life sciences/office portfolio totaling 2.4M SF in Boston, San Diego, and San Francisco. Occupancy was just 58% as of September 2025. This concentration in office-heavy portfolios reflects a broader trend where distress continues to build, particularly as legacy office exposures struggle to refinance in the current rate environment.

The $536M loan on Chicago’s 2.8M SF Aon Center also moved to special servicing due to anticipated default ahead of its July maturity. Other significant transfers included loans on Pittsburgh’s U.S. Steel Tower and Denver’s Panorama Corporate Center.

Some Recovery Noted

March also saw 16 loans exit special servicing. Notably, the $352.3M Orion Office Portfolio, with 2.1M SF across 13 states, returned to master servicing after securing a 24-month extension that pushes its maturity to February 2029.

Looking Forward

The ongoing office multifamily distress within CMBS is expected to keep special servicing rates elevated, especially for large urban properties with weak occupancy. The market will continue to watch for further loan transfers and any signs of sector stabilization as 2026 progresses.