[Update 1: Adds size of total US CMBS market in 2009] For the first time since the industry began forming commercial mortgage-backed securities (CMBS), delinquencies reached above 6%, according to a report from Trepp, which studies commercial real estate trends. For the month of December, 6.07% of CMBS loans fell behind by 30 days or more, up from 5.65% in November and a far climb from 1.21% in December 2008. That’s a 500% increase in one year, according to the report. Trepp analysts aren’t the only ones noting the surging delinquencies in CMBS. Data from the credit-rating agency Realpoint showed the delinquent unpaid balance rose more than 16% in November to $37.93bn. According to the report, the climb was “an astounding” 440% from a year earlier. In a recent speech at the Economic Forecast Forum in Raleigh, North Carolina this week, Elizabeth Duke, a governor of the board of the Federal Reserve System provided some reasons for the sharp decline in performance. “Hit hard by the loss of businesses and employment, a good deal of retail, office, and industrial space is standing vacant. In addition, many businesses have cut expenses by renegotiating existing leases,” Duke said. She added that reduced cash flows and investors requiring higher rates of returns lead to lower valuations and losses after sales. “As a result, credit conditions in this market are particularly strained. Commercial mortgage delinquency rates have soared,” Duke said. According to the Fed’s survey of senior loan officers, banks continue to tighten standards on commercial loans and are reluctant to refinance maturing construction and land development loans. “In this environment, a turnaround in CRE is likely to lag the improvement in overall economic activity,” Duke said. “However, compared with the situation in the early 1990s, the problems in this sector now appear to be due largely to poor business fundamentals rather than widespread overbuilding, suggesting that the performance of the CRE sector will gradually begin to improve as the economy continues to strengthen.” According to Trepp, the total CMBS market in the US in 2009 stood at $724.5bn. And, though it is difficult to pinpoint exactly when the first complete CMBS was formed, back in 1999 Morgan Stanley lead the market with $10.5m in issuance. Write to Jon Prior.