Cracks are poised to appear in the CMBS market as 2022 draws to a close, as the CMBS special servicing rate rose last month for the first time since the third quarter of 2020 — and that aligns closely with industry sentiment expressed earlier this year in a far-reaching study by Trepp.

Ten out of every eleven respondents to Trepp's recent sentiment survey said they expected CMBS delinquencies to rise over the next six months. The CMBS delinquency rate declined by eight basis points in August to 2.98% and has now fallen for 24 out of the last 26 months. But while that rate "generally moves in tandem with broader economic trends, different economic indicators are relaying mixed signals about the overall health of the U.S economy," says Trepp's Jack LaForge, including near-historic unemployment against the backdrop of declining US GDP and high inflation.  "Within this limbo period, it makes sense that the CMBS Delinquency Rate has continued to fall, but with a broader recession predicted by economists to take place in 2023, cracks in the CMBS market are likely to appear as 2022 concludes."

As an example, LaForge points out that the CMBS special servicing rate rose 13 basis points in August to 4.92%, with the distress primarily focused on retail and multifamily, which saw 117 and 67 basis point jumps, to 11.03% and 1.90%, respectively.