**The Truth About CRE Distress: A Closer Look Behind the Headlines**
Distress in commercial real estate (CRE) has become a hot topic across multiple media outlets. Recent headlines have labeled the situation as a potential “real estate debacle,” and analysts have flagged rising distress rates in certain asset-backed securities, such as CRE CLOs.
However, Marcus & Millichap is urging stakeholders to take a more measured view.
In a newly published research brief titled *”Will A Wave Of Distressed CRE Come to Market? Recent Data Offers Important Insights,”* the firm’s analysts reviewed CMBS (Commercial Mortgage-Backed Securities) data sourced from Real Capital Analytics. The assessment acknowledges current declines and delinquencies but emphasizes that the overall situation is far from catastrophic.
Here are some key takeaways from the report:
– The overall CMBS delinquency rate reached 7.2% in July 2025, up from 5.4% in July 2024. Still, this level remains well below the post-Global Financial Crisis peak of 10.3% observed in 2012.
– Delinquencies are unevenly impacting property types. Office properties are facing the harshest conditions, with delinquency rates nearing 11%. In stark contrast, industrial property delinquencies remain minimal at just 0.5%.
– Missing a loan payment doesn’t automatically signal distress. According to the report, “just because a borrower misses a loan payment does not mean a property falls immediately into distress.”
In addition to CMBS-based distress, Real Capital Analytics examined a broader scope of distressed commercial real estate. Although the total amount of CRE facing distress remains elevated compared to the previous year, it is slightly lower than levels recorded in the first quarter of 2025. Approximately $122 billion in commercial real estate assets were considered distressed as of the end of Q2 2025.
For investors adopting a wait-and-see approach in hopes of a larger wave of distressed sales, the data offers a sobering perspective. Only 2.6% of total trade volume came from distressed sales in the first half of 2025—suggesting that significant buy opportunities from distressed assets remain rare.
Moreover, debt capital is still available in the market. Lenders continue to offer workout options for borrowers in good standing. And while distressed properties do exist, they are typically “fringe cases,” with issues such as deferred maintenance making them less appealing options.
Bottom line: Holding out for the “perfect” distressed opportunity may cause investors to overlook assets that are higher in quality and offer attractive cap rates in the current market environment.
