According to Kroll Bond Rating Agency (KBRA), the year 2025 is expected to be a record-breaking year for CMBS, with issuance and special servicing volume reaching levels not seen since the global financial crisis 15 years ago. However, KBRA also cautioned that there will still be credit challenges for existing CMBS.
In their latest report, KBRA predicts that delinquency and special servicing rates for CMBS loans will continue to rise. They noted that negative rating actions have already doubled compared to last year and expect even more downgrades in the coming months.
The office sector is particularly vulnerable as approximately 32% of maturing loans rated by KBRA are set to take place in this sector. This could lead to further rating pressure due to declining valuations compounded by difficulties in refinancing these loans.
Overall, KBRA warns that specially serviced loan volumes could surpass previous peak levels of 10.5%, which occurred during the pandemic but quickly decreased afterwards. This time around, they anticipate longer resolution periods leading up higher volumes of specially serviced loans.
