Nearly a quarter of Chicago properties tied to a commercial mortgage-backed security are in some form of distress, the highest rate in the country by a wide margin, per a new report.

Roughly 23% of CMBS loans tied to Chicago buildings were considered either distressed or delinquent in August — about three times the average of 7.2% across the nation’s top 20 markets — according to an analysis by Kroll Bond Rating Agency released Sept. 11.

The city’s distressed rate surpassed second-place Denver (19.1%), Philadelphia (14.2%) and San Francisco (13.9%) and represented a near doubling of the 12.5% rate KBRA reported for Chicago last June.

KBRA analyzed about $600B in commercial real estate debt nationwide, finding that the level of overall distress has edged up from 4.5% in June 2022 to 6.8% in August. The New York-based credit rating agency attributed the national climb to the Federal Reserve’s 11 interest rate increases since March 2022, “its fastest rate hiking cycle over the past 35 years.”

But Chicago’s leap into the distressed building stratosphere represented more than just difficulty refinancing and was led by its heavy lodging and office exposure, study authors said, per Reuters. A few large loans were marked as delinquent or distressed last month, including a loan with a $400M-plus balance against the Aon Center, a $329M loan backing the Palmer House Hilton and a $388M loan on Prudential Plaza, Reuters reported.

“Commercial buildings, vital to Chicago’s economy, are in severe distress,” a coalition of business and CRE leaders led by Building Owners and Managers Association of Chicago Executive Director Farzin Parang wrote in an opinion piece for the Chicago Sun-Times this week opposing Mayor Brandon Johnson’s proposed real estate transfer tax.

“The post-pandemic era has seen less than half of workers returning to their offices, resulting in the highest vacancy rate in 75 years. With enough unoccupied downtown office space to fill 16 Willis Towers, experts project downtown office buildings could lose up to 50% of their value.”

KBRA’s analysis saw better news for seven major markets, which all posted distress rates under 2%. Those include Orlando, Florida; San Jose, California; Phoenix; Miami; Boston; and Seattle. San Diego’s rate was less than 1%.

When it came to distress by property type among major metros, New York came in first for retail, with 17% of CMBS-backed assets deemed to be troubled. Denver had the report’s highest rate of office distress at 40.2%, and Houston led the list of problem mixed-use projects at 75.5%. San Francisco topped all other large metros for distress in lodging (59.3%) and multifamily (22.7%).