CRE delinquency has been on the rise since the pandemic, but distress sales remain uncommon, according to a Marcus & Millichap market analysis. Some economic indicators have renewed concerns that a wave of distressed transactions still looms, but investors who wait too long may miss out on opportunities to acquire high-quality assets at historically high cap rates.
Delinquency among CMBS loans is a potential indicator, said the analysis. The overall CMBS delinquency rate was 7.2% in July, which was up from 5.4% in July 2024. That rate, while rising, remains significantly below the post-Global Financial Crisis peak of 10.3% in 2012, according to Marcus & Millichap.
In addition, delinquency rates are much more weighted toward specific property types like office, which posted a rate near 11% in July. Meanwhile, retail, hospitality and multifamily were all in the low to high 6% band, and industrial properties were just 0.5%, said the report.
“Just because a borrower misses a loan payment does not mean a property falls immediately into distress,” Marcus & Millichap explained
Beyond CMBS loan delinquency, the volume of CRE that faces distress has been showing signs of improving. According to Real Capital Analytics, about $122 billion of CRE faced distress at the end of the second quarter, up about $25 billion from a year ago but down slightly from the first quarter of 2025. Office properties face the most distress at 47% of the total, followed by multifamily, retail and hospitality, which each comprise between 13% and 19%. Only 2% of the total comes from industrial properties.
Overall, only 2.6% of total trade volume came from distressed sales during the first half of this year, which is about equal to 2016 levels. The report said lender leniency may be helping to keep the volume of distressed transactions relatively low. Debt capital has remained generally available, and many lenders continue to offer borrowers in good standing workout options, Marcus & Millichap said.
Borrowing rates range from about 5.5% to 8%, depending on the conditions and location of the asset. Investors targeting distressed properties are frequently finding fringe cases where hurdles such as deferred maintenance impact the appeal of the asset.
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