Commercial real estate distress accelerated in the second half of 2023, according to analytics firm CRED iQ. The pace of loans being added to the servicer watchlist was roughly 110% faster compared to the first six months of the year. 

As of the December 2023 remittance reports, 15,373 loans were added to the servicer watchlist in the second half of 2023, representing nearly $100 billion of loans. In that same six-month period, 860 loans were transferred to the special servicer. The servicer watchlist total for the year was 23,085 loans. 

In total, more than $133 billion of loans were added to the watchlist in 2023, CRED iQ reported.  This compares to approximately $25 billion that transferred to special servicing. 

An example is a $525-million loan, including $143 million in subordinate debt, that was added to the servicer’s watchlist last September due to concerns with its second largest tenant, WeWork. The loan is backed by the Midtown Center (pictured), an 867,654-square-foot office tower in downtown Washington, DC. Fannie Mae’s headquarters lease accounts for 82% of the gross leasable area; however, the GSE plans to exit its lease five years early. 

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