DBRS Morningstar CMBS Monthly Highlights—June Remittance: Delinquency and Special Servicing Rates Move Higher on Continued Office Underperformance

-- The delinquency rate for loans packaged in U.S. commercial mortgage-backed securities (CMBS) rose for the third straight month to 3.84%, up 20 basis points (bps) from May.
-- Since hitting a bottom of 2.81% in December 2022, the CMBS delinquency rate equaled a 16-month high last posted in March 2022.
-- The office sector continues to see the largest monthly increase in delinquency rate, shooting up 90 bps in June to a near five-year high of 4.13.
-- The special servicing rate rose for the fourth straight month, up 22 bps to 6.82%, its highest level since December 2021.
-- The office special servicing rate has risen for six straight months, jumping 82 bps to 7.89% in June, and has more than doubled from 3.33% in June 2022.
-- Because of the slowdown in the commercial real estate (CRE) market, a distressed sale market hasn’t materialized. Distressed property sales haven't topped $260 million since the summer of 2021 and registered just $115.8 million in June.
-- With lenders and investors shying away from office properties, CMBS refinance activity remains tepid, pushing the maturity payoff down for the fourth straight month, sinking to 45.4% from 47.7%.
-- The year-to-date (YTD) maturity payoff rate stands at 54.7%. DBRS Morningstar's 2023 outlook for the maturity payoff rate at roughly 50% to 55% isn't much changed because of the persistent complications that will continue to challenge refinancing maturing office and mall loans.