CMBS Delinquency Rose 2% in July, Even as Distressed Sales Remained Low
The U.S. faces $122 billion worth of commercial real estate distress, of which nearly 50% is office
By Brian Pascus September 8, 2025 1:28 pm
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Here’s a paradox for you: Even as the rate of commercial mortgage-backed securities (CMBS) loan delinquencies rises, the number of distressed sales has remained surprisingly low.
A new report from Marcus & Millichap found that even as $122 billion worth of commercial real estate loans faced distress in the second quarter of 2025, and the overall CMBS delinquency rate in July rose nearly 2 percentage points to 7.2 percent from its July 2024 levels, only 2.6 percent of total trade volume in the first half of the year came from distressed sales — its lowest metric since 2016.
“While the number of trades of financially or operationally challenged commercial properties has increased since the pandemic, these distressed transactions have not become as prevalent as after the Global Financial Crisis,” wrote the Marcus & Millichap authors.
The firm stated that a combination of lender leniency, and a proliferation of available debt capital (largely thanks to the growth of private credit), has kept the share of distressed sales low, for now, as borrowers find a way to stay in good standing with their lenders on different types of underwater properties.
Moreover, Marcus & Millichap found that delinquency rates have been weighted toward specific property types such as office, while assets within the industrial sector have barely seen defaults.
“The office delinquency rate was near 11.0 percent in July, while the measures for retail, hospitality and multifamily were all in the low to high 6 percent band,” wrote the authors. “The delinquency rate for industrial properties was 0.5 percent.”
The national CMBS delinquency rate stood at 7.2 percent in July 2025. And while it remains elevated, the delinquency rate is still below the 10.3 percent all-time high recorded in July 2012 or the 10 percent rate from mid-2021. In total, the $122 billion in CRE distress across the nation is up $25 billion from last summer but still lower than its levels from the first quarter of this year.
Office distress makes up nearly 50 percent of all CRE distress nationally, with retail making up 13 percent and hospitality accounting for 19 percent, according to Marcus & Millichap.
Brian Pascus can be reached at bpascus@commercialobserver.com.
