Data from CRED iQ suggests that a significant share of the growing number of CRE loans that are delinquent are being transferred to special servicing in an effort to save them from actual default on monthly payments.
That conclusion is based on the difference between the delinquency rate of 8.78% and the much higher special serviced rate of 11.21% in November 2025.
In the same period, maturity defaults and sector-specific weakness drove the CRED iQ Overall Distress Rate to 11.63%, underscoring the persistent volatility in the market.
Refinancing risk rather than pure cash-flow insolvency was the primary cause of the current distress cycle, according to the software firm. Non-performing matured loans accounted for 40.81% of all distressed debt. Combined with performing matured loans (17.91%), the two represented nearly 59% of all distressed CMBS loans that were past their maturity date but with unpaid balances.
“This ‘maturity wall’ indicates that while many properties may generate sufficient cash flow to cover debt service—evidenced by the 17.16% of distressed loans that are technically ‘Current’ on payments—they are unable to secure refinancing in the current capital markets environment,” the report stated.
The sector in greatest distress is office, hosting a rate of 17.55%, followed by multifamily (10.8%), hotel (10.33%) and retail (9.08%). Niche sectors continued to outperform, including industrial and self-storage, with just 1.9% and 0.15%, respectively.
The lesson to be learned by CRE investors and CMBS bondholders is the need for careful credit monitoring, especially in the office and multifamily sectors, the report cautioned.
“With nearly 60% of distressed loans tied to maturity defaults, the market’s ability to clear this backlog will depend heavily on interest rate movements and the willingness of special servicers to extend or modify terms in the coming quarters.”
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