**The Truth About CRE Distress: Market Insights from Marcus & Millichap**
Recent headlines have sounded the alarm over a surge in distress within the commercial real estate (CRE) market. Seeking Alpha has referred to the situation as a developing “real estate debacle,” and other sources have highlighted increasing distress rates in CRE Collateralized Loan Obligations (CLOs).
However, Marcus & Millichap’s response to the concern is clear: “Calm down.”
In a recently released research brief titled *Will A Wave Of Distressed CRE Come to Market? Recent Data Offers Important Insights*, Marcus & Millichap analysts call for a more measured interpretation of the market data, specifically referencing Commercial Mortgage-Backed Securities (CMBS) data from Real Capital Analytics (RCA).
Here are some key takeaways:
– The overall CMBS delinquency rate rose to 7.2% in July 2025, up from 5.4% in July 2024. Despite the increase, this rate remains well below the 10.3% peak seen during the post-Global Financial Crisis in 2012.
– Delinquencies vary significantly across property types. Office properties posted a delinquency rate near 11%, while industrial property delinquency remained low at just 0.5%.
– Not all missed payments indicate immediate distress. As the report notes, “just because a borrower misses a loan payment does not mean a property falls immediately into distress.”
Beyond the scope of CMBS loans, RCA’s data also examined the broader volume of distressed CRE. While distress in the market has become more common over the past year, signs of improvement are emerging. At the end of Q2 2025, approximately $122 billion in commercial real estate was classified as distressed — slightly down from Q1 levels.
Investors hoping for a massive wave of distressed assets may want to reconsider a wait-and-see strategy. According to Marcus & Millichap, just 2.6% of total transaction volume came from distressed sales in the first half of 2025. Furthermore, debt capital continues to be accessible. Lenders are reportedly working with borrowers in good standing to provide workout solutions.
While distressed properties do exist in the current environment, the report emphasized that many of them are “fringe cases.” These assets often come with added complications, such as deferred maintenance, making them less attractive investment opportunities.
The bottom line? The perfect distressed deal may never materialize. Investors who wait too long could miss out on purchasing higher-quality assets that are currently trading at elevated cap rates.
This is the reality of today’s CRE distress landscape — conditions may be challenging, but they’re far from catastrophic.
