Even as Kroll Bond Rating Agency (KBRA) projects commercial mortgage-backed securities (CMBS) issuance to reach a post-2008 high of $183 billion in 2026—an 18% increase from 2025—the agency warns that loan distress is also expected to escalate.
“Moderating borrowing costs and stabilizing property fundamentals, together with liquid capital markets and sustained investor demand, supported robust issuance in 2025,” KBRA notes in its report. “While we expect these conditions to continue driving issuance in 2026, the elevated volume of distressed loans will likely lead to more negative than positive rating actions.”
Loan distress, which includes both loans that are 30 or more days delinquent and those that are current but in special servicing, climbed to 10.9% as of October 2025. This marks a notable rise from 9.3% at the end of 2024 and 6.7% at the end of 2023 across conduit and single-borrower CMBS transactions. The office sector has been the primary contributor to the increase, with a distress rate of 17.4% in October 2025, up from 14.8% at year-end 2024 and 8.6% at year-end 2023.
“We expect the distress rate to continue to rise into 2026 before flattening out later in the year, with higher issuance volumes helping to moderate the overall rate,” KBRA concluded.
