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CMBS Issuance Hits Post-2007 High Despite Rising Distress
Non-bank capital is stepping up as banks pull back from CRE lending.
Jordan B.
August 21, 2025
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Good morning. CMBS issuance is booming again, hitting its strongest first half since 2007, even as distress and delinquencies climb. Investors are piling into SASB and CRE-CLO deals, reshaping the debt landscape.
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🎙️This week on No Cap: Jack and Alex sit down with MaryAnne Gilmartin to explore the twists, risks, and breakthroughs that took her from Brooklyn beginnings to leading skyline-defining projects in Manhattan.
Market Snapshot
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CMBS Surge
CMBS Issuance Hits Post-2007 High Despite Rising Distress
Despite rising delinquencies and capital markets uncertainty, securitization remains a critical lifeline for CRE financing.
Issuance still strong: CMBS issuance hit $59.6B in the first half of 2025—the highest since 2007—driven by SASB deals, which accounted for nearly 75% of activity. Conduit deals have shrunk, while investors increasingly favor SASB and CRE-CLOs, the latter posting their strongest quarter in 2.5 years.
Investor appetite shifts: Investor demand is expanding to include more office exposure, signaling a notable change in sentiment. CRE-CLOs, once clouded by concerns over multifamily distress, have shown resilience, with investors largely made whole despite early volatility.
Distress still elevated: KBRA reports US private-label CMBS delinquency at 7.5% in July, with 10.6% of loans either delinquent or in special servicing. Downgrades continue to outpace upgrades, reflecting ongoing stress from higher interest rates and loan performance concerns.
Non-bank lenders step up: With banks pulling back, non-bank capital sources—debt funds, REITs, private equity, and insurers—are playing a larger role, often collaborating across structures. Many bridge lenders are aggregating loans into CRE-CLOs, while others are turning to warehouse lines, blurring traditional capital source lines.
➥ THE TAKEAWAY
Adjusting to higher rates: Market participants are slowly accepting that today’s interest rates may be closer to historical norms than the “low-rate decade” of the 2010s. While transaction volume remains muted due to slow price discovery, debt remains available, and CRE’s diversity and durability offer reasons for optimism.
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✍️ Editor’s Picks
Diversify with energy: Oil and gas are out of favor, not out of use. While the world diverts capital elsewhere, Aspen Funds is investing where demand is stable, supply is constrained, and sentiment is mispriced. (sponsored)
Dream team: Agora and Verivest are teaming up to modernize real estate fund management with a streamlined, tech-driven back-office solution.
REIT rebalance: AEW Capital Management trimmed stakes in 31 US REITs in Q2, reducing its total REIT exposure by 7.1% while significantly boosting positions in select names.
Builder blues: Builder confidence dipped to 32 in August as high mortgage rates, affordability concerns, and sluggish buyer traffic continue to weigh on the housing market.
BREIT strong: Blackstone’s BREIT remains resilient post-tragedy, posting solid returns and boosting its data center and Sunbelt market exposure.
Housing crackdown: Trump’s HUD plans to revive a rule that could evict mixed-status families, raising fears of mass displacement and legal pushback.
🏘️ MULTIFAMILY
Rent regulation: Local renter-protection rules covering income source, eviction, and screening are linked to annual rent hikes of $700–$1,200.
Rent collections: Independent landlords saw on-time payments tick up to 83.2% in August, though rates remain down YoY for the 25th straight month.
Housing shortfall: LA is far off track on its 2029 housing targets, with apartment construction at historic lows and affordable unit production lagging badly.
DC deal: Foulger Pratt bought a 1,248-unit apartment portfolio from AvalonBay for $447M, marking one of the year’s biggest multifamily trades in Washington, DC.
Immigration impact: Immigration is reshaping rental housing, boosting demand for workforce units while luxury projects face lease-up risk.
Retirement rush: With millions of boomers nearing 80, demand for senior living far exceeds supply.
🏭 Industrial
Data demand: AI and hyperscaler growth pushed North America’s data center vacancy to a record-low 1.6%, driving up lease rates and fueling rapid expansion.
Takeover attempt: Sixth Street offered $24.10/share to acquire Plymouth Industrial REIT, a 65% premium, following their 2024 strategic partnership.
Port pressure: Tariff uncertainty has slowed absorption and raised vacancies in US port industrial markets.
Texas tech: Vantage Data Centers is investing $25B to build a 10-building, 1.4 GW AI-focused data center campus in rural Texas.
Tenant drivers: Bulk industrial leasing jumped 17.5% in early 2025, led by 3PL tenants and strong Southeast demand.
🏬 RETAIL
Retail pulse: July retail sales rose 4.3%, but foot traffic and big-ticket spending remained cautious.
Record sale: Hines set a new Houston price-per-square-foot record with its $137.6M acquisition of Montrose Collective, paying $727/SF.
Coffee IPO: Black Rock Coffee Bar filed for an IPO after posting $95.2M in revenue and narrowing losses, with plans to trade on Nasdaq.
Food trends: Consumer demand for healthier, eco-friendly products is driving major shifts in food production, packaging, and facility planning.
🏢 OFFICE
🏨 HOSPITALITY
Historic sale: Greenwich Village’s storied Washington Square Hotel, once home to music legends like Bob Dylan and Joan Baez, has sold for $23M to Library Hotel Collection.
Upscale expansion: Choice Hotels added four new Cambria locations across key US markets, boosting its upscale footprint.
📈 CHART OF THE DAY
The Labor Market Stress Indicator (LMSI) has closely aligned with US recessions, with downturns occurring whenever 30 or more states face rising unemployment.
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