Commercial Real Estate Shock as Office CMBS Defaults Hit 11.7%

TLDR:

• Office CMBS delinquency rate reached 11.7%, surpassing all prior records, including the Financial Crisis.
• Higher interest rates and weak office demand have disrupted refinancing across U.S. office markets.
• Large office defaults in major cities accelerated the rise in CMBS delinquencies.
• Losses are spreading across global investors as distressed office debt exits bank balance sheets.

Office CMBS delinquency rate climbed sharply in early 2026, hitting a record 11.7% for office properties. This number has surpassed the 2008 Financial Crisis peak by roughly 1.6 percentage points, according to Trepp data tracking CMBS defaults. 

Office delinquencies outpace other sectors. On the other hand, multifamily rates have also risen, reflecting continued distress in U.S. commercial real estate markets.

Rising Office CMBS Delinquencies

The Office CMBS Delinquency Rate reached 11.7%, exceeding levels seen during the 2008 Financial Crisis. Historically, office delinquencies remained low before the crisis. 

Even during market stress, rates rarely surpassed 10%. The sharp increase reflects structural market changes rather than temporary disruptions.

From 2000 to 2007, delinquencies were minimal, showing stability in office lending. During the Financial Crisis, rates spiked as refinancing froze and tenant demand collapsed. 

After 2010, rates declined steadily, reaching 1–2% by 2021–2022, which created a false sense of security.

Since 2023, delinquencies accelerated due to higher interest rates, remote work, and expanding cap rates. Refinancing became increasingly difficult. 

The surge is driven by real cash flow problems rather than temporary market panic. Many loans remain in “extend and pretend” mode, masking the underlying stress.

Manhattan Office Defaults and Market Effects

Two Manhattan towers triggered the January 2026 spike. One Worldwide Plaza, with $1.2 billion in debt, failed to cover its tax bill and debt service. 

Extell Development is positioned to foreclose through a mezzanine loan, following a court ruling allowing the auction to proceed. Vacancy rose from 10% in 2024 to 37% in 2025 as major tenants downsized or left. 

The building’s value fell from $1.7 billion in 2017 to $390 million. Similarly, One New York Plaza entered maturity default in January. 

Morgan Stanley occupies 44% of the space and is subleasing part of it. Vacancy reached 35%, worsening debt repayment challenges. 

Brookfield Properties sought extensions, but cash flow remained insufficient. These defaults illustrate the shift in office market conditions.

CMBS delinquencies affect investors globally, including REITs, bond funds, and private equity firms. Banks sold troubled loans to reduce risk exposure. 

Other regions also report delinquencies, such as a $211 million office loan in Plainsboro, New Jersey, delayed due to insurance disputes. Special servicers funded shortfalls and settlements are in progress.

The current 12.3% rate may not be the peak. Rising vacancies and refinancing challenges continue to pressure loans. 

Office CMBS delinquencies are now a measure of actual market conditions, reflecting a broad repricing in the commercial office sector. Cash flow realities are reshaping the landscape of office real estate.

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