CRED iQ warns that commercial real estate distress could continue to climb well into this year—potentially reaching as high as 15% by the end of 2026—as weaknesses deepen across property sectors and refinancing pressures mount. The analytics firm described the rise as a "persistent upward trend" with "no signs of abating."
According to CRED iQ, distress in commercial mortgage-backed securities (CMBS) includes loans that are at least 30 days delinquent, in special servicing or have matured without repayment. The company's analysis covers both CMBS conduit loans and single-asset, single-borrower (SASB) loans.
Delinquencies surged from 2.93% to 9.40% over the past several years, while specially serviced loans more than doubled from 4.47% to 11.10%. Because both categories have expanded at once, CRED iQ said the data points to broad systemic stress rather than isolated portfolio issues.
Total distress across the sector rose from 4.83% in July 2022 to 11.98% in January 2026—a 148% increase over 43 months. CRED iQ called that pace "remarkable," driven by a combination of monetary tightening, deteriorating property fundamentals and barriers to refinancing. The firm noted that its projection assumes no new disruptions, though some industry observers believe mounting strain in multifamily and industrial properties could make that assumption optimistic.
Even with brief periods of improvement, such as a dip to 10.30% last April, distress accelerated again through late 2025 and into 2026. CRED iQ noted that borrowers are now facing "deeper workout situations requiring intensive special servicing intervention" as financial strains accumulate.
As of January 31, $40.1 billion in loans were under active special servicing treatment. Among them, foreclosures accounted for 39.1% ($15.7 billion), followed by modifications (20.3%, $8.1 billion), note sales (18.7%, $7.5 billion), REO dispositions (12.7%, $5.1 billion), extensions (4.0%, $1.6 billion), discounted payoffs (2.6%, $1 billion), bankruptcies (1.4%, $0.54 billion) and deeds in lieu of foreclosure (1.3%, $0.50 billion).
CRED iQ highlighted that the dominance of foreclosure as a resolution method shows that "restructuring efforts have significantly worn out." Servicers appear more willing to sell notes to transfer risk to distressed-debt investors than to pursue borrower modifications, which account for only a fifth of the current workout volume.
"The prevalence of liquidation-focused strategies over collaborative solutions underscores servicers' belief that many troubled assets cannot be salvaged under current market conditions," CRED iQ wrote in its report.
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