Dꦆelinquency rates on commercial mortgage-backed securities backed by office pꦅroperties jumped in May by the most since June 2018.

The office delinquency rate, which increased 125 basis points to 4.02% in May, hasn't been above 4% since 2018, according to a report by CMBS data firm Trepp. Offices typically run on 10-year leases and loans, which means defaults and delinquencies in 2018 included CMBS debt originated during the financial crisis.

"Office has been the most heavily watched part of the market as firms look to aggressively reduce space," according to the Trepp report. "Sublease space is at or near record highs in many markets as demand from big tech firms has eroded sharply. In addition, many companies are letting leases expire or are renewing with smaller footprints."

Remote work has meant office tenants were paying for space they weren't using, and as leases expire, companies are reevaluating their office leases and looking for ways to reduce space. Meanwhile, many office tenants, particularly tech firms, have subleased existing space, Trepp said.

Google last week said it would list 1.4 million square feet of office space for sublease in Northern California. In March, Amazon announced that it would be ♌pausing construction on part of its new headquarters in Arlingt𒊎on, Va. 

CMBS delinquencies climb across industries

Year-over-year, the overall U.S. CMBS delinquency rate is up 48 basis points. The percentage of loans that are 30 days delinquenꦕt was 0.24%, up four basis points for May. The all-time high was 10.34% in July of 2012. 

For industrial commercial loans, the delinquency rate dropped one basis point to 0.39%. The multifamily rate fell 36 basis points to ൩1.46%. The industrial sector has been one of the strongest segments of the commercial real estate market as warehouse owners continue to benefit from the rise of e-commerce.

Lodging delinquencies picked up two basis points, ending May at 4.25%. Retail also climbed in delinquencies, up 56 basis points in May to 6.67%.