Delinquency rates on commercial mortgage-backed securities (CMBS) surged to a record high in June, surpassing levels seen during the 2008 financial crisis and signaling mounting distress for bondholders, REITs, and potentially the broader economy.
CMBS delinquency rates jumped 49 basis points last month to 11.1%, eclipsing the previous peak of 10.7% reached during the Great Financial Crisis, according to The Kobeissi Letter, citing Trepp data.
Since the start of 2023, delinquency rates have soared by 9.5 percentage points, with office properties showing the most severe signs of stress.
“Last month, $1.8 billion in CMBS office loans fell into delinquency, while $1 billion in previously delinquent loans were resolved,” The Kobeissi Letter said, adding: “The office sector is beyond bear market territory.”
BREAKING: The delinquency rate on Commercial Mortgage-Backed Securities (CMBS) for offices jumped 49 basis points in June, to a record 11.1%.
undefined The Kobeissi Letter (@KobeissiLetter) July 2, 2025
This has now officially surpassed the post-2008 high of 10.7% and the December 2024 peak of 11.0%.
Since the start of 2023, the… pic.twitter.com/94OiBcjO7e
Although some troubled loans are being worked out, the pipeline of distress is expanding faster than it’s being cleared.
Making matters worse, many loans are coming due in a high-interest-rate environment, with the Federal Reserve declining to follow global peers in cutting rates this year.
Failing commercial and office real estate loans are far from an isolated problem — their impacts ripple through the entire economy.
The rapid deterioration since early 2023 has left lenders, investors, and landlords with little time to adapt, raising the risk of forced sales, write-downs, and broader financial stress.
Office REITs significantly underperform
As JPMorgan noted in a recent report, office REITs have faced significant headwinds this year as pandemic-driven shifts in work habits have become permanent, leading to higher vacancies and a sharp decline in rent income.
This adds to the mounting evidence in Trepp’s data showing that office space remains a persistent problem area.
Offices were among the worst-performing REIT property types in April, posting an average drop of 9.65%. By comparison, single-family housing REITs declined 4.49%, Triple Net REITs fell 3.64%, and self-storage REITs were down 1.31%.
According to Simon Bowler of 2nd Market Capital Advisory Corporation, offices are the worst-performing REIT sector of 2025, with an average decline of 24.06% in the first four months of the year. This decline surpassed hotel REITs, which fell 22.9% over the same period.
Like JPMorgan, Bowler emphasized that the office sector took a major hit during the pandemic and has yet to adapt to the new normal.
S&P Global Markets Intelligence data shows four REITs have suspended their dividends as of May. Other office REITs have slashed their dividend payouts between 15% and 98%, said Bowler.
Your email address will not be published. Required fields are markedmarked