Commercial Mortgage-Backed Securities (CMBS) Loan Performance Analysis: July 2025 Report by KBRA

Commercial Mortgage-Backed Securities (CMBS) Loan Performance Analysis: July 2025 Report by KBRA

In a recent press release authored by Business Wire, KBRA, a leading rating agency, has reported an increase in the delinquency rate for KBRA-rated U.S. private label commercial mortgage-backed securities (CMBS) in July 2025.

The delinquency rate for the CMBS portfolio rose to 7.5% from 7.3% in June, with the total delinquent plus specially serviced (distress) rate slightly increasing by 7 basis points to 10.6%.

The most significant sector-wise changes included a 146 basis points month-over-month increase in the conduit mixed-use sector delinquency rate, reaching 13.2%, largely driven by the delinquency of the Columbus Square Portfolio ($293.5 million across three conduits).

Regarding sector-specific newly distressed loans added in July, the office sector had the highest share by volume at 35.6% ($487.4 million), followed by retail at 27.2% ($372.6 million) and mixed-use at 22.7% ($310.5 million).

Notable loans that became nonperforming or matured this month include Tucson Mall, a retail loan with a balance of $179.3 million, and Walden Galleria, a retail loan with a balance of $210.5 million, both of which are now in foreclosure as they failed to pay off at their respective maturities in July.

Additionally, Federal Center Plaza and One Riverway, two office loans with a combined total of $198.8 million, became performing matured balloon this month.

The retail delinquency rate increased 97 bps this month to 6.1%, while the current but specially serviced rate decreased 63 bps to 3.2%.

The trend aligns with broader challenges in the commercial real estate sector, including higher interest rates and weak office demand, which pressure credit metrics across CMBS deals.

For more information, contact Shawn Li (Senior Analyst at KBRA, 1 646-731-1427 or [email protected]), Aryansh Agrawal (Associate at KBRA, 1 646-731-1381 or [email protected]), Andrew Foster (Director for Business Development at KBRA, 1 646-731-1470 or [email protected]), or Robert Grenda (Managing Director at KBRA, 1 215-882-5494 or [email protected]).

Sources: - KBRA Releases Research – CMBS Loan Performance Trends: July 2025 (kbra.com, 2025-08-01) - KBRA Releases Research – Conduit Subordination (morningstar.com, 2025-07-28)

• The increase in the delinquency rate for KBRA-rated U.S. private label commercial mortgage-backed securities (CMBS) in July 2025 might have a significant impact on the future performance of these investments.
• Despite the rise in delinquencies, sectors such as office and mixed-use saw an influx of newly distressed loans, with the office sector accounting for the highest share by volume.
• As reported by KBRA, the retail delinquency rate increased significantly this month, attributable to challenges stemming from higher interest rates and weak office demand.
• In contrast, office loans like Federal Center Plaza and One Riverway, despite becoming matured this month, did not contribute to the delinquency rate, as they were performing matured balloon loans.

Read also: