KBRA Releases Research – 2026 U.S. CMBS Outlook: Issuance Momentum Builds; Loan Distress Remains Elevated

NEW YORK--(BUSINESS WIRE)--KBRA releases its 2026 CMBS Sector Outlook, which highlights our 2026 new issuance forecast, trends among the seven major property types including demand and supply, and factors that may affect property performance next year. We also discuss year-to-date (YTD) KBRA-rated CMBS conduit trends and metrics, take a closer look at 2025 ratings activity, and provide our rating expectations for 2026.

The Federal Reserve, which began lowering interest rates in 2024, continued easing policy in 2025 with two additional cuts, bringing the federal funds rate to its lowest level in three years. Moderating borrowing costs and stabilizing property fundamentals, together with liquid capital markets and sustained investor demand, supported robust issuance in 2025. While we expect these conditions to continue driving issuance in 2026, the elevated volume of distressed loans will likely lead to more negative than positive rating actions.

Key Takeaways

• New Issuance: KBRA forecasts private label commercial real estate (CRE) securitization volume to reach a post-global financial crisis (GFC) high of $183 billion in 2026, based on current and expected market conditions. This represents an 18% increase from our full-year (FY) 2025 estimate, which itself jumped 38% year-over-year (YoY). Single-borrower (SB) transactions are expected to account for more than one-half of this issuance, with CRE collateralized loan obligations (CLO) and conduits expected to grow YoY as well. Conduits are expected to be dominated by five-year deals.
• Maturity Wall: A total of $525 billion in loans will mature in 2026, followed by $587 billion in 2027. With continued weaker demand from banks for CRE, more loans may continue to find their way into CRE securitizations.
• Property Fundamentals: By property type, retail benefits from steady sales growth and limited new supply, while the office sector will continue to experience an uneven recovery. Industrial should continue to benefit from e-commerce and a catch-up of market rent growth in recent years, while lodging’s performance should remain mostly stable. Multifamily demand persists, as high homeownership costs and record-low affordability are positives for the sector, although pockets of credit stress are emerging. Data centers will continue to benefit from strong tailwinds, and single-family rental (SFR) should hold steady despite recent declines in home prices.
• Distress Rate: The loan distress rate (30+ days delinquent plus current but specially serviced loans) climbed to 10.9% in October 2025, up from 9.3% at year-end (YE) 2024 and 6.7% at YE 2023 across conduit and SB transactions. The office sector was the biggest driver of the increase, with a 17.4% distress rate in October, up from 14.8% at YE 2024 and 8.6% at YE 2023. We expect the distress rate to continue to rise into 2026 before flattening out later in the year, with higher issuance volumes helping to moderate the overall rate.
• Surveillance Activity: CMBS downgrade activity remained elevated in 2025, though the pace is expected to plateau by 2H 2026 as the CRE recovery gains traction. However, persistent weakness in the office sector and emerging multifamily loan distress will likely continue to exert downward pressure on ratings.

KBRA has streamlined the Outlook format this year to enhance the reader experience. We welcome any feedback or comments.

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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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