CRE Distress Hits $116B as Office Debt Crunch Spreads

Good morning. Rising debt burdens, policy uncertainty, and market pullbacks are fueling a new wave of commercial real estate distress across the U.S.

🎙️ This week on No Cap podcast, Trammell Crow’s Tommy Lee unpacks the return of institutional capital, and what it means for risk, returns, and the future of CRE deal-making.

Market Snapshot

Delinquencies

A MESSAGE FROM CRE DAILY

Q225 Burns + CRE Daily Fear and Greed Index

The latest Q2 2025 JBREC + CRE Daily Fear and Greed Index is in, offering a fresh look at investor sentiment across commercial real estate.

Access the 29-page survey chartbook for in-depth insights into investor sentiment, capital trends, and challenges—along with a sector-by-sector breakdown featuring exclusive commentary.

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• Smart capital: What separates investors who commit capital from those who waste your time? Get this insight and more in the The Modern Investor Acquisition Playbook. (sponsored)

• Opportunity update: The Senate aims to make Opportunity Zones permanent, introducing new benefits for rural areas and stricter criteria for low-income community eligibility.

• Disaster gaps: Post-disaster recovery has spurred economic growth, but also pushed out lower-income residents, fueling climate-driven gentrification.

• Midyear momentum: CRE market fundamentals remain stable, with leasing and investment activity expected to rise despite headwinds from tariffs and cost pressures.

• Timber investment: Weyerhaeuser has broken ground on a $500 million TimberStrand facility in Monticello and Warren, Arkansas, expected to create 200 jobs and expand the company’s footprint in the U.S. South by 2027.

• Watchlist warning: CRE CLO distress rose to 13.2% in May, with over half of loans past maturity and not performing.

• Sourcing deals: Discover why mobile home parks are emerging as high-return investments, with insights on strategy, market trends, and what actually works. (sponsored)

• GSE reform: The NHC urges ending GSE conservatorship with reforms to boost housing market stability and affordable lending access.

• Investor confidence: Multifamily investment jumped 35% in Q125 as buyers bet on long-term rent growth despite slowing rents and peak new supply.

• Renewals: Apartment lease renewals are climbing nationwide as economic pressures, job uncertainty, and psychological comfort keep renters in place, offering landlords cost savings and operational stability.

• Frisco focus: AEW acquired The Casey, a 300-unit luxury community in Frisco, TX, as DFW multifamily investment activity surges.

• Selective growth: Multifamily starts rose 5% year-over-year in May 2025 despite a sharp monthly dip, as developers find ample debt financing but face tighter equity backing focused on prime locations and proven sponsors.

• Server subsidies: States are offering major tax breaks to attract data centers, sacrificing hundreds of millions in revenue as tech giants expand server infrastructure.

• Shedding weight: Blackstone sold a 12-building shallow-bay industrial portfolio near Atlanta to Taurus Investment Holdings and Investcorp for approximately $141 million.

• Market outlook: Analysts expect industrial REITs to regain momentum by late 2025 as policy clarity improves and supply-demand fundamentals rebalance, with inflationary rent growth potentially returning by 2027.

• Valuation caution: Retail valuations are stabilizing globally, but tariff uncertainty is prompting caution among investors and tenants.

• Kroger shuffle: Kroger will close 60 underperforming stores nationwide over 18 months while ramping up new store openings in high-growth markets following its failed merger with Albertsons.

• Holding steady: Columbia, SC's retail market held steady in Q1 2025 despite a slight dip into negative absorption, with low vacancy and steady investor interest offsetting broader retail headwinds.

• Billion-dollar bet: RXR is set to acquire Manhattan’s 590 Madison Ave. for nearly $1.1B, marking NYC’s first billion-dollar office sale since 2022.

• People first: Cost still leads office decisions, but more companies are moving CRE under HR to align space with employee experience and engagement.

• Supertall: Citadel has requested FAA approval to deploy Florida’s tallest-ever construction cranes as it advances plans for its 1,040-foot Miami HQ, aiming to anchor "Wall Street South" with a world-class office tower.

• Miami landmark: Miami’s first supertall, the Waldorf Astoria Hotel & Residences, is rising fast with 90% of condos sold and completion expected in 2028.

• Hawaii refi: Blackstone and Atrium Hospitality secured over $1.3B in CMBS loans to refinance major Hawaii resorts, signaling strong lender confidence in the recovering luxury hospitality market.

• Growth plans: Hyatt is growing its loyalty program with a $2.6B Playa acquisition and a new brand focused on conversions and experiential perks.

📈 CHART OF THE DAY