**CRE Distress on the Rise, But Distressed Sales Remain Subdued**
Although delinquency among commercial real estate (CRE) loans is increasing, this trend has yet to translate into a spike in distressed property sales, according to a recent Research Brief from Marcus & Millichap. The firm reported that while the volume of distressed CRE reached $122 billion by the end of the second quarter—up about $25 billion year-over-year—this figure actually declined slightly from the first quarter. The data is based on research from Real Capital Analytics.
Office properties are bearing the brunt of current distress, representing 47% of the total. Multifamily, retail, and hospitality sectors each accounted for between 13% and 19% of the distress. Industrial assets were the least affected, comprising just 2% of the overall distressed volume.
Despite the increased delinquency, distressed sales remain low. In the first half of 2025, only about 2.6% of total trade volume consisted of distressed transactions, consistent with figures from 2016. Marcus & Millichap attributes this to more favorable borrowing conditions compared to the aftermath of the Global Financial Crisis. Lenders have generally continued to make debt capital available and are providing workout options to borrowers in good standing, which has helped to stave off a surge in forced property sales.
This balance between rising distress and contained distressed sales suggests a market still resilient in the face of financial headwinds.
