Special Service Rate Hits 9.89%, Highest In Four Years
For the first time in four years, the overall CMBS special servicing rate across all vintages reached 9.89%, according to Trepp. This marks an increase of 311 basis points from 6.78% in December 2023, and a rise of 36 basis points from November 2024.
The property type with the highest special servicing rate was office, at 14.78%, which represents a 15 basis point increase month-over-month. Over the past year, the office sector saw a sharp rise of 633 basis points. The last time the office special servicing rate surpassed 14% was for three months in 2012, following the global financial crisis. Should the rate reach 15%, it would represent the highest level since 2000, according to Trepp.
Another notable category is mixed-use properties, which saw the largest month-over-month increase from November to December 2024, rising by 181 basis points. This marked the first time since 2013 that mixed-use special servicing exceeded 11%.
Retail followed closely with the second-highest special servicing rate in December at 11.67%, though this was a slight decrease of 12 basis points from November after five consecutive months of increases.
Multifamily properties, which had the second-lowest special servicing rate a year ago at 3.17%, saw an increase to 8.72% in December, up from 7.37% in November, making it the third-lowest special servicing rate in December 2024.
The lodging special servicing rate rose by 14 basis points from November, reaching 8.29% compared to 8.15% the previous month, and a jump from 7.13% in December 2023.
Industrial properties continue to have the lowest special servicing rate, remaining under 1% at 0.56%. A year ago, this rate was 0.37%, and it was 0.38% in November.
In December, $2.3 billion worth of loans were transferred to special servicing, the smallest amount since July 2024. Mixed-use and office loans dominated the transfers, representing 22.0% and 21.8%, respectively. The remaining transfers were spread fairly evenly across multifamily, lodging, industrial, and retail sectors.
The largest loan transferred was the $1.07 billion Workspace Property Trust Portfolio SASB loan, which included both A-Piece ($209.8 million) and B-Piece ($850 million) components, along with an additional $120 million fixed-rate loan. The transfer was prompted by an imminent non-monetary default ahead of the loan’s maturity in July 2025.
Another significant transfer involved the $519.5 million Yorkshire & Lexington Towers loan, which was triggered by payment default. The loan was backed by two multifamily towers on Manhattan’s Upper East Side, which had a DSCR (NCF) of 1.65x and 93% occupancy in the first half of 2024.
The key question now is how long this upward trend in special servicing rates will continue.
Source: GlobeSt.