**Rise in CRE Distress Hasn’t Led to Surge in Distressed Sales**
Although delinquency rates are increasing in the commercial real estate (CRE) sector, this trend hasn’t sparked a corresponding surge in distressed property sales, according to a new Research Brief from Marcus & Millichap. The firm cites data from Real Capital Analytics showing that while the volume of distressed CRE amounted to approximately $122 billion at the end of the second quarter—an increase of $25 billion from the same period last year—it actually declined slightly compared to the first quarter of the year.
Much of the distress is concentrated in the office sector, which accounts for 47% of the total. This is followed by multifamily, retail, and hospitality properties, each contributing between 13% and 19% of the distressed volume. In contrast, industrial properties represented just 2% of the total.
One key factor preventing a rise in distressed property sales is the relatively favorable lending environment. In the first half of 2025, distressed sales accounted for only about 2.6% of total CRE transaction volume—comparable to levels observed in 2016. Marcus & Millichap notes that lender leniency is playing a significant role, as many financial institutions are providing workout options to borrowers in good standing. Additionally, debt capital remains generally available, a stark contrast to conditions following the Global Financial Crisis.
These factors are helping the market avoid the wave of distressed sales that characterized the aftermath of the Great Recession.
