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Denver is grappling with a severe wave of commercial mortgage-backed securities (CMBS) office loan delinquencies, now ranking sixth among the 25 largest U.S. metro areas, according to new data from Trepp. The city’s office CMBS delinquency rate has surged to 27.2%, significantly outpacing the national average of 10.6%.
This places Denver ahead of cities like Baltimore (26.6%) and just behind Atlanta, Chicago, and Philadelphia, all with delinquency rates exceeding 28%. Among western U.S. markets, only Portland has a higher rate, topping the list at 38.4%.
In contrast, cities such as San Diego report minimal distress, with rates under 1%. Major East Coast metros like New York, Boston, and Washington, D.C., are clustered closer to the national average, according to Bisnow.
Denver’s mounting distress stems largely from loans originated between 2018 and 2021, when low interest rates encouraged aggressive borrowing and new development. As office values decline and tenants reduce space or exit leases, owners are struggling to refinance, leading to an increase in defaults.
Several downtown Denver properties show this trend:
- Industry RiNo Station is over 90 days delinquent on a $60 million loan, with only 54% occupancy.
- 700 Broadway, a medical office building, is 30 days delinquent on a $51 million loan and has entered special servicing.
- World Trade Center I & II, once valued at $176 million, are now in real estate owned (REO) status post-foreclosure, with their appraisal slashed to $34.1 million, a 75% drop.
These three assets alone account for nearly $337 million of Denver’s total $434 million in delinquent CMBS office loans.
Unlike some peer cities, such as Seattle (13.3%), Austin (8.3%), and Nashville (2.8%), Denver’s distress is disproportionately concentrated in older, non-core buildings and those with expiring leases.
While top-tier Class-A offices continue to attract demand in high-growth areas, smaller firms are increasingly opting for less expensive Class-B or C spaces.
Looking ahead, more distress could emerge as many CMBS loans originated in 2021 approach maturity next year, compressing timelines for refinancing amid ongoing market volatility.
