KBRA Releases Research – Single-Borrower CMBS Default and Loss Study: Shaped by Unprecedented Events

NEW YORK–(BUSINESS WIRE)–#creditratingagency–KBRA releases a new single-borrower (SB) CMBS default and loss study that updates our previous observations on the credit behavior of SB loans.

The SB sector has existed for over three decades and has historically experienced very few defaults and minimal losses over that period. However, the unprecedented events that commercial real estate (CRE) faced over the past six years have left an indelible mark on the sector.

Since our last SB default and loss study in 2022, the cumulative default rate has risen sharply across the sector. The default rate reached 12.9% as of September 2025, doubling from 6.4% in September 2022 and rising significantly higher than the 1.4% reported in our 2019 update. The office sector led the deterioration, with its default rate increasing to 19.7% from 1.9% in the prior study.

As with many of the default trends discussed in this report, the increase must be viewed within the broader context of the stress experienced by the CRE markets over the past six years. The COVID-19 pandemic in 2020 marked the beginning of this period, disrupting property performance across asset types, particularly lodging and retail. This was followed by a surge in inflation beginning in 2021, which raised operating costs and pressured margins across the CRE sector. In response, monetary policy tightened significantly, leading to a rapid and unprecedented rise in interest rates from 2022 through 2023 after more than a decade of historically low borrowing costs. The pandemic also triggered a structural shift in workplace behavior with the wide adoption of remote and hybrid work models, which led to sustained long-term demand destruction for office space. Together, these forces have meaningfully affected property performance, valuations, and the overall lending environment. The result has been a notable increase in loan defaults and losses across the SB CMBS universe, as captured in this latest update.

Key Takeaways

Population

• The study population included 861 loans securing SB transactions issued between August 1993 and September 2024, representing a total issuance balance of $493.9 billion. This population is 34% larger than the 644 loans covered in the 2022 study.
• Lodging (244, 28.4%), office (203, 23.6%), and retail (145, 16.8%) represent the top three property types.
• Slightly less than one-half of the loans (389, 45.2%) were still outstanding as of September 2025.

Defaults

• There were 111 defaults during the study period, resulting in a 12.9% cumulative default rate, by count.
• All but eight of these defaulted during the six years since the pandemic, with 19.8% (22 loans) defaulting in 2020 during the height of the pandemic, and more than two-thirds (71.2%, 79) defaulting in 2022 or later.
• Nearly one-half of the defaulted loans (53) are still being actively worked out by the special servicer. The other half is evenly distributed as either reperforming or fully resolved (29 each).
• Most of the defaulted-but-reperforming loans (23 of 29) were modified to extend their maturity beyond their original final/fully extended maturity date, with the remaining receiving other forms of modifications.
• Characteristics that influenced defaults include:
  • Property type: Office had the highest number of defaults (40) and the highest cumulative default rate (19.7%), followed by lodging (31, 12.7%) and retail (18, 12.4%).
  • Single asset vs. portfolios: Default rates were slightly higher for loans secured by single properties (14.3%) compared to loans secured by multi-properties (11.5%). However, in the case of office, lodging, and multifamily, portfolio loans defaulted more than single-property loans.
  • Interest rate type: Floating rate loans defaulted (13.9%) more than fixed rate loans (11%).
  • Loan term: Across fixed rate loans, shorter-term loans had a higher default rate than longer-term loans. The loans with terms of less than six years had a default rate of 12.4% compared to those of nine years or longer at 10.3%.
  • Amortization profile: Amortizing balloon loans, while not a large portion of the study population (10.9%), had a meaningfully lower default rate at 6.4% compared with the 13.6% default rate for full-term interest-only (IO) loans.
  • Loan-to-value (LTV): Loans with higher in-trust LTV ratios generally had higher default rates compared to lower LTV loans. For example, loans in the 40%-50%, 50%-60%, and 60%-70% LTV ranges had default rates of 9.9%, 11.8%, and 14.6%, respectively.
  • Debt service coverage (DSC): Loans with higher initial issuer-reported DSC generally exhibited lower default rates. Those with DSC greater than 3.0x had a default rate of 6.6%, compared with 20.5% for loans with DSC between 1.2x and 2.0x.
  • Market tiers: Loans secured by portfolios of properties across multiple markets had a meaningfully lower default rate of 11.8% compared to primary markets (16.6%) and secondary markets (17.2%).
  • Loan balance: Loans with lower balances had a higher propensity to default. For example, loans with balances of $250 million and below had a default rate (17.6%) more than twice that of loans over $1 billion (8.3%).

Resolutions and Losses

• Slightly more than one-quarter of the defaulted loans (29 of the 111) have been fully resolved.
• Of the resolutions, 21 were resolved with no losses or losses of less than 1%, one resolved with a loss of 3.9%, and seven incurred losses of more than 20%.
• The average loss severity for all resolved loans was 11.2%, while loans with >1% loss had an average loss severity of 40.3%.
• The average resolution time for resolved loans averaged 24.4 months from the default date. The resolved loans with no or <1% loss had a resolution time of 25.1 months while the loans with losses >1% resolved in 22.9 months.

Click here to view the report.

Recent Publications

• 2026 U.S. CMBS Outlook: Issuance Momentum Builds; Loan Distress Remains Elevated
• Conduit CMBS Default and Loss Study Update: 2.0 Begins to Make Its Mark
• CMBS Trend Watch: November 2025
• CMBS Loan Performance Trends: November 2025

About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

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