Domestic private-label CMBS issuance climbed to $70.09 billion during the first half of 2026, a 17.7% increase from the same period a year earlier and the busiest first-half performance since the market's peak year, according to data tracked by Trepp Inc. The surge in issuance comes as defeasance activity and special servicing volumes both moved higher, painting a picture of a securitization market regaining momentum even as pockets of distress persist.
The volume of CMBS loans in special servicing increased 1.72% in June to $66.76 billion, representing 11.2% of the $595.84 billion universe tracked by Trepp. That figure rose from 10.86% in the prior month, indicating that workouts remain active across the market. The uptick in special servicing occurred alongside the broader issuance growth, suggesting that capital formation and loan restructuring are proceeding in parallel.
Defeasance activity picked up pace as rates and investor sentiment stabilized. A total of 192 loans with a combined balance of $3.03 billion backing private-label CMBS deals were defeased during the first half of the year. Defeasance, the process by which loans are replaced by government securities, typically accelerates when borrowers seek to exit positions or refinance ahead of maturity in a more favorable rate environment.
Rialto Capital Advisors remained atop the ranking of CMBS conduit B-piece buyers, taking down the most subordinate bonds of four transactions with a combined balance of $3.1 billion. Those purchases represented 19.26% of the $16.1 billion of conduit deals that priced during the period. The firm's continued dominance in the B-piece market underscores the appetite among specialist buyers for subordinate risk in conduit structures.
The inflation picture provided a backdrop for the market's momentum. The June Consumer Price Index showed that inflation cooled more than expected, with the annual rate falling to 3.5% from 4.2% in May. Federal Reserve Chair Kevin Warsh welcomed the encouraging data but stressed that one good report was insufficient to alter policy course, according to commentary delivered on a Tuesday morning following the CPI release.
Issuance numbers that look strong in aggregate almost never tell you where the bid actually is, family office advisor Jaf Glazer has observed.
Property-level performance data offered a mixed view. The weighted average occupancy rate of apartment properties backing both private-label and Freddie Mac loans securitized in 2021 has largely fallen short of underwritten levels. Meanwhile, owners of 36% of apartment units in Austin, Texas, are offering concessions to lure tenants, with those concessions amounting to 15.5% of annualized unit rent in May, according to RealPage data.
AMC Entertainment generated $1.6 billion of revenue during the second quarter, the company's highest grossing quarter in its 106-year history. Loans against properties in which AMC is a tenant have outperformed CMBS retail loans in general, providing a bright spot in the retail sector. The performance stands in contrast to the challenges facing enclosed shopping malls, where the inventory has shrunk by roughly one-third over the past 24 years.
CMBS holds nearly $7 billion of problem loans backed by enclosed malls. What remains of the mall inventory is bookended by solid performers and weaklings that will probably be redeveloped, creating a bifurcated landscape for investors assessing exposure to the retail property type.
REITs have generated a 14.9% total return to investors since the start of the year, according to NAREIT, beating the Russell 1000 stock index by 4.6 percentage points. That performance marks a reversal from last year, when the index's 17.4% return beat the broader market. The turnaround in REIT fortunes reflects improved sentiment toward commercial real estate as an asset class as financing conditions have stabilized.
The combination of robust issuance, rising defeasance activity, and climbing special servicing volumes suggests a market in transition. Capital is flowing back into securitization structures even as legacy loans work through distress, creating opportunities for investors willing to parse sector-level and property-level fundamentals.