The 2025 commercial real estate landscape is at a turning point, with surging loan maturities, rising delinquency rates, and record office vacancies putting pressure on lenders and property owners alike. A new report by The Kaplan Group offers a clear, data-driven snapshot of the market’s health and its biggest challenges.
Key Takeaways
- Commercial mortgage-backed security (CMBS) delinquency rates at 7.29% are nearly six times higher than traditional bank loans, signaling severe distress in securitized commercial real estate debt.
- The $957 billion in commercial real estate (CRE) loans maturing in 2025 represents nearly triple the 20-year average, creating unprecedented refinancing pressure.
- Office vacancy rates close to 20% at the national level highlight the sector’s structural crisis, while multifamily transactions grew 39.5% year-over-year.
CRE Delinquency Rates
Delinquency rates are a powerful early-warning signal of sector stress, revealing which loan types and lender groups face the greatest risk of nonpayment.
- Overall Commercial real estate delinquency loan delinquency: 1.57% (Q2, Federal Reserve)
- Commercial mortgage-backed security (CMBS) is showing the highest distress at 7.29%
CRE Loan Maturity Wall
Billions in commercial mortgages are coming due during a period of elevated interest rates, creating a major refinancing challenge and potential for increased defaults.
- Maturing in 2025: $957 billion
- Maturing in 2026: $539 billion
- Maturing in 2027: $550 billion
- 20-year average: $350 billion
The CRE loan maturity wall shows $957 billion in loans maturing in 2025, nearly triple the historical average
Office Market Distress
Record-high vacancy rates in the office sector, especially across major metro areas, underscore the impact of remote work and sector realignment—now the key sources of CRE risk.
- National office vacancy rate: 19.4% (July)
- Austin: 27.2% vacancy, +5.0% YoY change
- San Francisco: 26.3% vacancy, +2.3% YoY change
- Phoenix: 17.5% vacancy, –0.1% YoY change
Office vacancy rates vary significantly across metros, with Austin and San Francisco showing the highest distress
Transaction & Sector Volume
Transaction volume and growth by property type signal which sectors are attracting investor capital, revealing areas of comparative strength within a turbulent market.
- CRE transaction volume: $115 billion (Q2)
- Multifamily: +39.5% YoY
- Office: +11.8% YoY
- Industrial volume: $18.8 billion
- Retail volume: $17.6 billion
Banking Sector Vulnerability
Many banks face heightened exposure due to high real estate concentrations and losses, making them susceptible to turbulence if default rates climb.
- Banks with CRE/assets >50%: 102
- Banks with unrealized securities losses > equity: 185
- Banks vulnerable (8% CRE loss scenario): 278
CRE Lending Spreads
The cost of borrowing for commercial properties reflects lenders’ risk perception; wider spreads indicate caution and sector-specific stress.
- Multifamily: 168 basis points
- Retail: 168 basis points
- Industrial: 151 basis points
- Office: 207 basis points
The 2025 commercial real estate market is facing unprecedented stress, with $957 billion in loan maturities and CMBS delinquency rates reaching 7.29%. While multifamily properties show resilience with 39.5% transaction growth, the office sector’s 19.4% national vacancy rate and 278 vulnerable banks suggest a substantial pipeline of distressed assets requiring collection and workout services
Methodology
Data Collection
- Official Data Sources: Gather metrics from Federal Reserve datasets, Trepp reports, and proprietary sector analysis (e.g., MBA, Altus Group, Yardi Matrix).
- Market Reports: Supplement with quarterly and monthly releases from trusted industry platforms and research groups.
Key Metric Selection
- Delinquency Rates: Track quarterly and monthly commercial loan delinquency across all major lender categories (banks, CMBS, GSEs, life insurers).
- Maturity Wall: Catalog and compare upcoming commercial mortgage maturities for 2025–2027 to historical averages.
- Vacancy Rates: Extract market-level and national office vacancy rates, focusing on metros with the largest YoY swings.
- Transaction Volume: Gather transaction data by property type, using YoY growth to highlight sector resilience or decline.
- Bank Exposure: Tabulate banking sector risk using asset-based CRE concentrations and securities loss estimates.
- Loan Spreads: Record current lending spreads to quantify credit risk premiums for each property segment.
Analytical Approach
- Trend Analysis: Quantify changes and identify inflection points in delinquency, maturities, and vacancy rates.
- Benchmarking: Compare current figures to historical trends to contextualize market shifts (e.g., maturity wall vs 20-year average).
- Sector Comparison: Contrast office, multifamily, industrial, and retail sectors using transaction and vacancy indicators.
- Risk Segmentation: Identify institutions and metros most exposed to CRE stress, using thresholds (e.g., banks with >50% CRE/assets).
- Visualization: Deploy bar charts, scatter plots, and tables to communicate variations and correlations in key data points.
Quality & Consistency Checks
- Data Validation: Cross-verify reported figures against multiple sources, correcting for reporting lag or estimation.
- Date Specificity: Use latest-available data (Q2, July, August 2025 etc.) for reliability and relevance.
- Sector Definitions: Clearly delineate office, multifamily, retail, and industrial segments across all indicators.
