"Fourth-quarter default rates reached their highest-ever levels both in principal balance and number of loans with no clear signs of stabilization," Fitch managing director Mary MacNeill says in a release. The $17.75-billion total of '09 defaults in the Fitch-rated universe was higher than the cumulative total of defaults from the inception of the CMBS market through 2008, $17.74 billion. Thirty-four percent of those '09 defaults occurred in Q4, Fitch says.

In terms of vintages, 2007-era CMBS loans led in defaults during '09 with 35.6% of the tally by principal balance. "The aggressive underwriting and higher leverage in the 2007 vintage is leading to substantially higher default rates," MacNeill says. The agency predicts 10-year cumulative default rates on '07-vintage CMBS to reach 27% within the Fitch-rated universe.

Retail loan contributed 32.3% of the total default volume in '09, followed by multifamily at 22.1%, office at 20.2% and hotel at 17.8%. Fitch projects notable default increases for each property type, especially office and hotel loans. "Office defaults spiked in the fourth quarter last year, with further rental and net operating income declines likely through next year before a rebound takes place," senior director Richard Carlson says in a release.