Distress across the commercial mortgage-backed securities market climbed to 10.91% in July, its highest level of 2026, as office loans continued to anchor the increase even as special servicers moved to get ahead of potential defaults, according to a report from commercial real estate data firm CRED iQ.
The overall distress rate rose 22 basis points from June, marking the third straight month of increases and reversing a modest dip to 9.97% in April. CRED iQ’s distress measure combines loans that are delinquent, in special servicing, or both, across the roughly $600 billion CMBS universe it tracks.
Within that total, the special servicing rate rose to 10.38%, up 42 basis points, while the delinquency rate climbed to 8.68%, up 24 basis points. CRED iQ noted that special servicing is rising faster than delinquency, a pattern it said suggests lenders are moving loans to special servicers proactively — before borrowers actually miss payments — rather than reacting to missed payments after the fact.
Office remains the weak point
Office loans posted the highest distress rate of any property type at 16.65%, extending a divide that has separated office from most other commercial real estate sectors since interest rates began rising. Mixed-use properties followed at 13.01% and multifamily at 11.21%. Industrial loans remained comparatively healthy at 2.35% distressed, and self-storage was the least distressed property type in the data at 0.28%.
CRED iQ said distress is concentrated geographically on the West Coast and in the Midwest, with some major metro areas showing distress rates double the national average while others remain below 3%. The firm did not name individual loans or properties in the report.
The gap between office and every other property type remains the defining feature of the CMBS market’s distress data: at 16.65%, office loans are distressed at more than seven times the rate of industrial loans and roughly 60 times the rate of self-storage loans. Multifamily and mixed-use loans, both carrying meaningful office or retail-adjacent exposure in many cases, sit well above the industrial and storage figures but still far below office. That spread has held roughly in place for much of 2026, even as the headline distress rate has ticked higher three months running, suggesting the recent increase is less about a new sector cracking and more about existing office-loan stress continuing to compound.
What it means
CRED iQ’s monthly distress tracker is the firm’s own analysis of loan-level CMBS data, making it a primary source for its own figures, though the underlying loan performance data ultimately traces back to servicer reporting across the securitized market. The office-multifamily-industrial split in this month’s numbers echoes a broader divergence RealtyWire has covered in commercial real estate this year, where even metros posting office vacancy improvement remain well above pre-pandemic norms, while industrial and storage assets have held up far better. The proactive-transfer pattern CRED iQ flags — special servicing outpacing delinquency — is the firm’s own interpretation of the data and should be read as one plausible explanation rather than a confirmed causal finding. What to watch: whether office distress keeps climbing into the fall as more loans reach maturity, and whether the West Coast and Midwest concentration CRED iQ identified persists or spreads to other regions.
