KBRA releases research The U.S. private-label CMBS loan distress rate entered double-digit territory in January 2026. However, although the distress rate, which includes both loans 30+ days delinquent and those that are current but specially serviced, continues to rise, the pace of increase has moderated. From January 2024 to January 2025, the distress rate climbed 250 basis points (bps) to 9.7% from 7.2%. In the following 12 months, the rate increased only 70 bps to 10.4% as of January 2026.

As the Federal Reserve continued its easing policy in 2025, declining borrowing costs and stabilizing fundamentals contributed to strong new issuance and gradually improving refinancing conditions in 2025 and early 2026. While these factors, as well as loan resolutions, may have contributed to lower distress rate growth, there continues to be a wide disparity in credit performance across metropolitan areas.

Key Takeaways

• The distress rate across the 20 largest MSAs aggregated 10.5%, which is slightly above the national rate of 10.4%.
• Among the top 20 MSAs, when comparing January 2026 and January 2025, there was a stark bifurcation in performance as the distress rates across half of these MSAs declined, while the rate in the other half increased (nine) or remained unchanged (one).
• The five MSAs with the highest distress rates were San Francisco (22.6%), Chicago (21.8%), Philadelphia (17.2%), Houston (13.9%), and Seattle (13.6%). Conversely, the five lowest distress rate MSAs include San Diego (0.4%), Boston (1.7%), Las Vegas (2.2%), Phoenix (2.4%), and San Jose (3%). A total of 12 MSAs show lower distress rates than the aggregate.
• By property type, office’s national distress rate was the highest (16.2%) as of January 2026. This was followed by mixed-use (13%), retail (11.5%), lodging (8.5%), multifamily (7.4%), other (2.1%), and industrial (0.9%).
• The MSAs that exhibited the highest distress rate within each major property type were San Francisco (lodging at 83.2%, multifamily, 49.7%, retail, 19.1%), Philadelphia (office, 34%), Houston (mixed-use, 53.2%), and Chicago (industrial, 16.3%).

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About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

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