The first quarter has shown possible developing challenges for commercial real estate. MSCI revealed that prices across all major U.S. property types declined. Bank lending growth dropped to an 11-year low, reported the Federal Reserve Bank of St. Louis.
The latest news is that commercial mortgage delinquencies increased, according to the Mortgage Bankers Association. They “rose across all major capital sources in the first quarter of 2025, reflecting growing pressure on certain property sectors and loan types,” Reggie Booker, MBA’s associate vice president of commercial real estate research, said in prepared remarks.
There had been a broad increase in delinquencies the previous quarter, except for life insurance companies, which showed a “slight decrease.”
The capital sources examined, and their definitions of their delinquent rates, are banks and thrifts (90 or more days delinquent); life insurance companies (60 or more days delinquent); Fannie Mae and Freddie Mac (60 or more days delinquent); and CMBS (30 or more days delinquent or in REO). These lenders hold more than 80% of the outstanding commercial mortgage debt.
MBA states that delinquency rates are not comparable between investor groups. The definitions differ and what might be considered delinquent in one group would not be in another. The organization does not include construction and development loans because they often represent the projects of single-family residential properties. However, FDIC delinquency rates for bank and thrift-held mortgages do include loans for owner-occupied commercial properties.
Banks and thrifts had a delinquency rate of 1.28%. That was a two-basis-point increase from Q4 2024. It was the highest level since 2014.
Life insurance companies’ portfolios had a 0.47% delinquency rate, a four basis-point increase from the previous three months. The last time the delinquency rate was this high for the lender type was in 1998, although it was much higher from 1990 to 1998.
Fannie Mae’s delinquency rate was up six basis points from the end of 2024, reaching 0.63%. Freddie Mac increased by the same number of basis points, but its percentage of 0.46%, than Fannie Mae's. Ignoring the pandemic, neither of the GSEs has seen this level since 2011.
The growth in CMBS delinquencies was the most concerning, the MBA said, because it showed financial stresses in a market segment without refinancing options. The delinquency rate was 6.42% during the quarter. That was a 64-basis-point increase over the fourth quarter of 2024. Its patterns of previous delinquencies are far more volatile than any other lending source. Ignoring a spike during the pandemic, the last time delinquencies were this high was in 2013.
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