Kroll Bond Rating Agency (KBRA) is forecasting a notable increase in commercial mortgage-backed securities (CMBS) issuance for 2026, projecting a post-2008 high of $183 billion—an 18% jump compared to 2025 levels. According to KBRA, this surge is supported by moderating borrowing costs, stabilizing property fundamentals, liquid capital markets, and continued investor appetite.
Despite this positive momentum in issuance, KBRA warns that distress in the market is expected to rise. “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,” the agency noted.
As of October 2025, the loan distress rate—which includes loans 30 or more days delinquent in addition to current loans that are being specially serviced—reached 10.9%. This marks a significant increase from 9.3% at the end of 2024 and 6.7% at year-end 2023. The office sector continues to be the primary contributor to this trend, with a distress rate hitting 17.4% in October 2025, up from 14.8% at the end of 2024 and 8.6% at the close of 2023.
KBRA anticipates that the distress rate will keep rising into 2026 before stabilizing later in the year. However, they expect that higher issuance volumes may help moderate the overall rate of distress within the CMBS market.
