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Delinquencies Tick Up Across the Board in Q125

While most saw only modest upticks, the CMBS sector experienced the sharpest rise, climbing 64 bps to 6.42%.

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Good morning. CRE delinquencies nudged upward across the board in early 2025, signaling growing stress in key sectors. While most investor groups remain stable, CMBS is flashing warning signs.

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Debt Distress

Delinquencies Tick Up Across the Board in Q125

Commercial mortgage delinquencies edged higher in early 2025, with all major investor groups feeling the strain, though not equally.

What happened: According to the Mortgage Bankers Association’s latest Commercial Delinquency Report, commercial mortgage delinquencies rose for all five major investor groups—banks and thrifts, CMBS, life companies, Fannie Mae, and Freddie Mac—in the first quarter of 2025. While most rates remain historically low, the uptick reflects tightening credit conditions and refinancing hurdles in several property sectors.

CMBS stands out: While most sectors saw only modest upticks, the CMBS sector experienced the sharpest rise, climbing 64 basis points to 6.42%, marking a continuing trend of distress in securitized loans.

By the numbers: Here’s how delinquency rates shifted in Q125 (measured by unpaid principal balance):

  • CMBS (30+ days delinquent or REO): 6.42% (+0.64 pp)

  • Banks & Thrifts (90+ days or non-accrual): 1.28% (+0.02 pp)

  • Fannie Mae (60+ days): 0.63% (+0.06 pp)

  • Freddie Mac (60+ days): 0.46% (+0.06 pp)

  • Life Companies (60+ days): 0.47% (+0.04 pp)

Context matters: The MBA notes that delinquency rates vary by lender due to differing accounting methods. Fannie Mae counts forbearance loans as delinquent, while Freddie Mac does not, provided the terms are met. Additionally, CMBS includes REO properties, which can inflate its rate.

Long-term patterns: CMBS loans have historically been more volatile, peaking above 8% during the financial crisis. The current 6.42% rate is the highest since early COVID-era disruptions, far outpacing more stable sources like life companies.

➥ THE TAKEAWAY

Big picture: The latest rise in delinquencies, particularly in CMBS, hints at deeper refinancing woes and stress in commercial property sectors. While still far from crisis territory, lenders and investors should watch for compounding risks as 2025 unfolds, especially in debt-heavy sectors with looming maturities.


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✍️ Editor’s Picks

  • June 9: Take the next step in your career with the Real Estate Investing Certificate Program from Wharton Online + Wall Street Prep. Save $300 with code CREDAILY. (sponsored)

  • Housing shift: Renters now outnumber homeowners in 203 US suburbs as affordability, remote work, and lifestyle changes reshape housing.

  • Tax tailwind: Pending legislation could boost CRE with revived opportunity zones, 100% bonus depreciation, and higher QBI deductions.

  • Cautious optimism: Despite lingering uncertainty and loan maturity challenges, investors are eyeing long-term opportunities, with multifamily and niche sectors showing resilience.

  • Debt deployment: Starwood Capital raised $2.86B across multiple debt funds to expand its real estate lending efforts amid a pullback from traditional lenders.

  • Private lending: KKR's CRE loan pipeline has surged to a record $42B, as landlords increasingly turn to private credit.

🏘️ MULTIFAMILY

  • Fee advantage: Continuing care communities with entrance fees are outperforming rental models in occupancy and rent growth across US markets.

  • Absorption dip: Apartment absorption rates have dropped sharply from pandemic highs, with the Midwest and South dragging national numbers down.

  • Default drama: Starwood is suing multifamily investor Alan Stalcup for over $110M, alleging he triggered recourse guarantees on defaulted loans.

  • Amazon assist: Bridge Housing, backed by a $22M loan from Amazon’s Housing Equity Fund, has acquired a 200-unit Kirkland apartment complex for $55M.

  • Voucher debate: NYC is proposing a rule to raise rent contributions from long-term CityFHEPS voucher holders from 30% to 40% of income.

  • Renter edge: A flood of new apartment supply is giving renters leverage to demand concessions as lease-up rates remain sluggish.

  • Sun Belt bet: EQR is buying 8 Atlanta apartments for $535M, doubling down on Sun Belt growth over aging coastal assets.

🏭 Industrial

  • Occupancy dip: Over half of Q1’s 73 MSF in new US warehouse space delivered vacant, as spec builds outpaced demand and pushed vacancies to 7%.

  • Data demand: Data center demand is booming on the back of generative AI growth, but questions around long-term scalability and sustainability remain.

  • Market move: Principal Asset Management and a state pension plan acquired a 2.1 MSF industrial portfolio targeting key logistics hubs in high-growth markets.

  • Tech expansion: Vantage Data Centers secured $5B to expand its US footprint, with nearly half funding a 1.5 MSF, preleased hyperscale campus in Ohio.

🏬 RETAIL

  • Waiting game: Tariff-related inflation hasn’t hit consumers yet, but rising input and utility costs are building pressure.

  • Gone thrifting: Secondhand retailers are expanding nationwide as inflation, tariffs, and shifting consumer values fuel demand for affordable, sustainable goods.

  • Discount demand: Dollar General beat earnings expectations and raised its outlook as it attracts more middle- and upper-income shoppers.

  • Soho boom: NYC retail is roaring back with a 14% rise in leasing and fierce competition for prime space, as global brands and cash-rich tenants drive demand.

  • Big Lots reboot: After reopening 219 stores, new owner Variety Wholesalers is eyeing more Big Lots lease acquisitions.

🏢 OFFICE

  • Unicorn market: In a bifurcated Manhattan CRE scene, only top-tier assets with premium tenants are fetching strong pricing.

  • AI footprint: OpenAI is leasing two floors in Bellevue’s City Center Plaza, marking another major office move by tech firms seeking space outside of San Francisco.

  • Comeback signal: Flynn Properties and DRA Advisors bought San Francisco’s Market Center for $177M in the city’s biggest office deal since 2022.

  • Portfolio pivot: Easterly Government Properties is accelerating efforts to diversify away from federal tenants, targeting state, local, and private-sector leases.

  • Policy pushback: California’s proposed commercial rent control bill is facing strong opposition from property owners.

🏨 HOSPITALITY

  • Labor backlash: NYC’s Safe Hotels Act faces pushback as hoteliers warn its subcontractor ban could raise costs and discourage investment.


📈 CHART OF THE DAY

According to Moody’s Analytics, private credit has become a major player in corporate finance, driving middle-market lending and private equity deals. But its rapid growth and rising interconnectedness are raising systemic risk concerns that warrant greater regulatory attention.


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