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**The Truth About Commercial Real Estate Distress: A Closer Look**
Recent headlines have sounded the alarm over commercial real estate (CRE) distress, with some sources referring to the issue as a “real estate debacle” and others highlighting rising distress rates among CRE collateralized loan obligations (CLOs). But are things really as dire as they seem?
According to a new report from Marcus & Millichap, there’s reason to remain calm. The report, titled “Will A Wave Of Distressed CRE Come to Market? Recent Data Offers Important Insights,” uses commercial mortgage-backed securities (CMBS) data from Real Capital Analytics (RCA) to put today’s market conditions into perspective.
Key findings from the report include:
– **Rising, But Historical Context Matters:** The overall CMBS delinquency rate in July 2025 stood at 7.2%, up from 5.4% in July 2024. While this rise is notable, it remains well below the post-Global Financial Crisis peak of 10.3% seen in 2012.
– **Uneven Impact by Property Type:** Office properties are bearing the brunt of the delinquencies, with rates approaching 11%. In contrast, industrial real estate remains relatively stable, with a delinquency rate of just 0.5%.
– **Not All Missed Payments Signal Distress:** The report also cautions against overreacting to missed payments, pointing out that a single missed loan payment does not automatically mean a property is distressed.
Additionally, RCA examined the total volume of distressed properties beyond just those tied to CMBS loans. As of the end of Q2 2025, approximately $122 billion in CRE was classified as distressed. Though this figure is sizable, it actually represents a decline compared to distressed assets identified in Q1 2025.
For investors holding out for a flood of discounted, distressed properties, the report advises caution. Only 2.6% of total trade volume in the first half of 2025 stemmed from distressed deals. Furthermore, capital remains available, and lenders are offering solutions for borrowers who remain in good standing.
The report also noted that existing distressed assets often come with considerable challenges—such as deferred maintenance—that reduce their overall appeal.
In short, waiting on the sidelines for ideal distressed opportunities could mean missing out on stronger assets now available at attractive cap rates.
The takeaway? While CRE distress is real and evolving, it’s not the catastrophic wave some have predicted—and well-informed investors may find more value by acting now rather than waiting for the perfect storm.
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