Office, Multifamily Distress Push CMBS Special Servicing Rate Higher
Several major office-backed CMBS loans transferred to special servicing last month, leading a key indicator of commercial real estate loan distress to reach its highest level in more than a year.
Trepp's CMBS special servicing rate climbed 27 basis points last month to 11%, according to a report published Monday. It was also up nearly a full percentage point year-over-year.
This distress wasn't spread evenly across the commercial real estate world.
Trepp found that the office and multifamily sectors recorded 44- and 45-basis-point increases in their special servicing rates, respectively, while lodging and mixed-use loans experienced 43- and 30-basis-point declines.
Office assets accounted for more than half of the nearly $2.9B in debt that transferred to special servicing across 42 loans in March.
The largest loan to hit special servicing was the $599M BMR Pool loan, which the borrower failed to pay off at its maturity last month. The loan was originated in March 2021 with an original balance of $2B, but the borrower lowered that by selling and refinancing assets.
The loan is backed by a six-property, mixed-use life sciences/office portfolio across 2.4M SF in the Boston, San Diego and San Francisco metro areas. The portfolio had 58% occupancy as of September 2025, according to Trepp.
The second-largest was the $536M loan underpinning the Aon Center in Chicago, which entered special servicing for imminent monetary default ahead of its July maturity date.
It is backed by a 2.8M SF downtown office building at 200 E. Randolph St., which was opened in 1972 and renovated in 2018. It was 66% occupied as of early 2025.
The borrower failed to make a required $2.5M payment for tenant improvements and leasing commissions, and it indicated it will be unable pay off the debt at maturity, according to Trepp.
Other big office loans that transferred to special servicing last month were a $245M loan backed by Pittsburgh's U.S. Steel Tower, a $240M loan tied to 181 W. Madison St. in Chicago and a $133M loan on the Panorama Corporate Center in the Denver suburbs.
Trepp's report also identified 16 loans that emerged from special servicing in March.
The largest was the $352.3M Orion Office Portfolio, which is backed by 19 office and mixed-use properties totaling 2.1M SF across 13 states. It transferred to special servicing in November but has returned to master servicing following a 24-month extension, which brought its new maturity date to February 2029.
