The 2020 cumulative default rate for CMBS reached 18.2% in 2020, exceeding its prior peak of 16.8% as the coronavirus pandemic weighed heavily on the commercial mortgage sector, Fitch Ratings reported Monday. Not surprisingly, hotels and retail loans experienced the largest share of defaults as the increase was the largest since rising to 3.8% from 0.8% in 2009.

The total annual default rate for 2020 was 3.3%, up from 0.3% in 2019. This was due to a spike in defaults stemming from the shutdowns as a result of the coronavirus pandemic, which also led to a slowdown in issuance.

Fitch tracked 555 loans with an issuance balance of $16.8 billion that were granted consent agreements in 2020. The vast majority were in payment forbearance/deferment to provide relief from performance challenges stemming from the pandemic. In 2020, 18 loans with an issuance balance of $1.8 billion were modified, compared to eight loans in 2019 with an issuance balance of $318.4 million.

Although hotels represented one of the largest shares of defaults in 2020, Fitch expects this property type to begin a quicker recovery as vaccines roll out, mitigation efforts are eased and travel picks up again, especially to drive-to destinations. Fitch said it expects retail defaults to continue into 2021 as the onset of the pandemic further stresses an industry already in the midst of a secular shift.