Commercial real estate in 2025 is in a strangely balanced place, with distress and opportunity rising side-by-side. Trepp described the market as sitting at an inflection point, with “reasons for tempered optimism despite persistent headwinds,” a view echoed by recent outlooks from Marcus & Millichap, Cushman & Wakefield and the Mortgage Bankers Association.
Strong CMBS issuance, easing rate volatility and conservative but active lending are offset by elevated delinquencies, especially in the office sector, leaving a credit picture that looks healthier on the surface than it feels underneath.
Commercial mortgage-backed securities showed a mix of resilience and strain as issuance climbed above $126 billion in 2025, the highest annual total since 2007, according to Trepp. Single-asset, single-borrower deals drove the market, accounting for roughly three-quarters of total volume as lenders concentrated on trophy and Class A properties backed by strong sponsors and largely steered clear of riskier exposures.
The overall CMBS delinquency rate fell by 20 basis points in November to 7.26 percent, helped in part by a $5.8 billion increase in the outstanding loan balance that mathematically pushed the ratio lower even as stress lingered, Trepp reported. Retail, multifamily and office loans all saw more new delinquencies than cures during the month. Still, the wave of new issuance outpaced that deterioration, muting the impact of fresh trouble spots on headline delinquency figures.
Office remains the most pressured property type with a delinquency rate of 11.68 percent, just eight basis points below its all-time high. Multifamily delinquency improved to 6.98 percent, but that level is still almost double the 4.18 percent recorded a year earlier, underscoring how strong issuance is masking ongoing stress rather than signaling a clean bill of health for the sector.
On the macro side, the Federal Reserve’s three rate cuts in the fall helped cool rate volatility and started to shift attention back to fundamentals.
“The conversation will continue to move away from ‘what’s the 10-year Treasury doing tomorrow’ and back to credit fundamentals, spreads, underwriting, and cash flow durability,” Trepp Research Director Stephen Buschbom said on a podcast.
Lenders are keeping underwriting standards tight yet are becoming more willing to engage “when the numbers work,” according to Trepp’s commentary on recent deal flow. Five conduit transactions priced at healthy subscription levels in the final weeks of the year are setting up solid momentum heading into 2026, Trepp said.
The software firm is also watching how the current “flight to quality” in lending might evolve as roughly $744 billion of commercial real estate mortgages come due next year. Trepp Chief Product Officer Lonnie Hendry said he expects some lenders to “finally capitulate” on certain secondary property types and locations, writing off troubled loans and creating space for investors to take a more opportunistic approach in 2026.
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