DBRS Morningstar CMBS Monthly Highlights—August Remittance: CMBS Delinquency and Special Servicing Rates Rise Again; Low Maturity Payoff Rate Persists Amid Gloomy Office Outlook

-- The delinquency rate for loans packaged in U.S. commercial mortgage-backed securities (CMBS) rose to its highest level since January 2022, increasing 27 basis points (bps) from July to 4.12% driven by a 74 bp and 26 bp increase in retail and office delinquency, respectively.
-- Since hitting a post-Coronavirus Disease (COVID-19) pandemic low of 2.81% in December 2022, the CMBS delinquency rate has risen in seven of the ensuing eight months.
-- The special servicing rate rose for the seventh straight month, inching up 6 bps to 7.12%, its highest level since September 2021.
-- The office special servicing rate has risen for eight straight months, increasing 37 bps to 8.51% in August 2023, and has more than doubled from 4.06% in November 2022.
-- Distressed property sales topped $400 million for the first time in 14 months, registering a still fairly low $418.9 million; however, these sales haven't topped $470 million since the summer of 2021. Many special servicers continue to hold on to the debt for longer and work out situations with borrowers.
-- Pressure on maturing loans, especially office and mall loans, continues to take a toll. The maturity payoff rate continues to underperform, rising just 5.3 percentage points to 33.9% in August from 28.6% in July 2023.
-- The year-to-date maturity payoff rate stands at 48.8%. DBRS Morningstar's 2023 outlook for the maturity payoff rate stands at roughly 50% to 55% as investors and lenders continue to shy away from maturing office, mall, and mixed-use loans. Multifamily continues to perform well, posting a 100% maturity payoff rate in August.