The CMBS special servicing rate tracked by Trepp moved sharply higher in October 2026, underscoring mounting distress in securitized commercial mortgages. The overall rate rose 25 basis points during the month to 11.74%, the highest reading since December 2012. The increase reflects a sizable wave of loans shifting into special servicing, with lodging assets accounting for a significant share of the new transfers.
According to Trepp, loans backing hotels and similar lodging properties were the primary driver of October’s movement. Lodging represented 37% of the $3.01 billion in CMBS loans that transferred to special servicing during the month, highlighting sustained stress in that segment of the capital stack. The sector’s prominence in recent transfers indicates that performance challenges and refinancing pressures remain elevated for hotel-backed securitized loans.
Lodging also dominated the largest individual transfers in October. The single biggest loan to move into special servicing was the $745.7 million Project Prime loan, which is secured by a portfolio of 84 lodging properties. Its size and portfolio nature make it a notable contributor to the month’s totals and a key indicator of how operating and financing headwinds are affecting hotel collateral across multiple locations.
Multifamily was also represented among the largest October transfers. The second-largest loan, the $517.7 million Blackjack Portfolio, is backed by a multifamily portfolio and entered special servicing after reaching its fully extended maturity last month. Its transfer illustrates how loans that have already exhausted extension options are now confronting final balloon payments in a challenging refinancing environment.
Other sizable loans that moved into special servicing included the $302.2 million Hyatt Regency Waikiki Beach Resort & Spa in Honolulu and the $285 million Gateways mixed-use loan in Newark, N.J. Trepp reported that about 45% of the outstanding balance across the notable loans beyond the two largest transfers was pushed into special servicing due to imminent balloon or maturity defaults, reinforcing the role of approaching loan maturities in driving distress.
Special servicing rates did not move uniformly across property types. Lodging registered the steepest monthly increase, rising 122 basis points to 10.17%. Multifamily followed with a 69 basis point increase, bringing its special servicing rate to 9.22%, while mixed-use climbed 44 basis points to 13.61%. Industrial also saw a modest uptick of four basis points, reaching 1.27%, suggesting comparatively limited but present distress in that sector.
In contrast, office and retail special servicing rates declined in October. The office sector, which remains among the most heavily scrutinized CRE categories, saw its special servicing rate fall 25 basis points to 16.60%, while retail declined 13 basis points to 13.71%. Despite these pullbacks, both sectors continue to exhibit elevated levels of distress compared with industrial and, to a lesser degree, multifamily. The October figures collectively point to a CMBS market where lodging, mixed-use, and certain maturing portfolios are at the forefront of special servicing activity, even as distress in office and retail remains high on an absolute basis.
