CRE CLO Distress Metrics Show Rising Pressures

In the ever-evolving landscape of commercial real estate collaterateralized loan obligations (CLOs), monitoring delinquency (DQ), special servicing (SS) and overall distress rates remains crucial for investors and lenders. Data from CRED iQ, a provider of CRE analytics, reveals notable trends through August 2025, highlighting a market grappling with economic headwinds such as rising interest rates and sector-specific challenges in office and retail properties. 

As of August, the DQ rate for CRE CLOs stood at 10.65 percent, up from 9.22 percent in July, marking an increase of 143 basis points (bps) month-over-month. This uptick reflects growing payment struggles, with 30-day delinquencies comprising a significant portion of distressed loans at 14.43 percent of the distressed allocated loan amount. 

Similarly, the SS rate climbed to 8.15 percent from 6.9 percent, a 125 bps rise, indicating more loans requiring specialized workout strategies. The combined distress rate (DQ
and/or SS) reached 13.32 percent, up 153 bps from the previous month, underscoring broader portfolio stress. 

Looking at recent trends, the past few months show volatility but an overall upward trajectory. July 2025 saw DQ rise 82 bps from June’s 8.4 percent, while SS edged up 23 bps. June, however, bucked the trend with a 264 bps drop in DQ from May’s 11.04 percent, suggesting temporary relief possibly from seasonal factors or restructurings. 

Year-over-year, comparing August 2025 to August 2024 (10.37 percent DQ, 5.67 percent SS, 11.77 percent distress), we see that rates have escalated, with DQ up over 28 bps and SS surging 149 bps. This acceleration aligns with maturing loans — over 59 percent of distressed allocated loan amounts in August fell under matured categories, split between performing (22.56 percent) and nonperforming (36.74 percent) — pointing to refinance difficulties in a high-rate environment. 

Deeper into the data, payment status breakdowns reveal persistent issues. In August, delinquencies in excess of 90 days accounted for 5.54 percent of distressed loans, while non-
performing matured loans dominated at 36.74 percent. Earlier months like March 2025 peaked at 11.86 percent DQ, driven by similar maturity walls. 

These trends signal caution for CRE CLO stakeholders. With office vacancies lingering and multifamily feeling pressures from oversupply, distress could intensify if interest rates remain elevated. However, opportunities exist in workouts and value-add strategies. Investors should prioritize granular analysis via platforms like CRED iQ to navigate this cycle effectively. 

Mike Haas is the founder and CEO of CRED iQ.