The U.S. commercial real estate (CRE) sector is edging toward a breaking point, with office loan delinquencies climbing to levels not seen even during the 2008 financial crisis.
The surge highlights both weakening demand for office space and the mounting pressure from higher borrowing costs.
The delinquency rate on U.S. commercial mortgage-backed securities (CMBS) tied to office properties hit 11.7% in August, an all-time high. That figure is now one percentage point above the post-crisis peak.
🚨BLOODY HELL:
undefined Global Markets Investor (@GlobalMktObserv) September 14, 2025
The delinquency rate on US commercial mortgage-backed securities (CMBS) for offices SPIKED to 11.7%, an ALL-TIME HIGH.
Office CMBS delinquencies are 1 percentage pt above the post-Financial Crisis peak.
The CRE CRISIS is getting worse👇https://t.co/t98oOsun1S
Widely followed X commentator Global Market Investor warned that the “CRE crisis is getting worse,” a view supported by data showing delinquency rates have been climbing steadily since early 2023.
The drivers are familiar. Higher interest rates have made refinancing far more expensive, while falling demand for office space has pushed vacancies to record levels.
Data from the National Council of Real Estate Investment Fiduciaries (NCREIF) shows U.S. office vacancy rates nearly doubled over the past five years, topping 20% in the second quarter.
The implications extend beyond property owners. Rising delinquency rates threaten losses for lenders and CMBS investors, increase rollover risk for borrowers, and raise the potential for broader economic spillovers as valuations reset lower and credit tightens.
CMBS loan maturities are becoming a bigger problem, but there’s a silver lining
Analysts at JPMorgan have long cautioned that tighter credit conditions and higher interest rates would put stress on the CMBS market, warning as far back as 2023 that loan maturities would “become more challenging by 2025–2027.”
As loans mature, distressed borrowers may be unable to refinance at higher rates or against lower valuations, triggering defaults and losses for lenders and CMBS investors.
That stress could spread to regional banks and local economies through tighter credit, reduced construction, falling tax revenues, and job losses.
According to JPMorgan, the silver lining is that office properties — the segment under the most stress — account for only a small share of total U.S. commercial real estate assets and an even smaller slice of the nation’s overall physical capital.
That means the broader economic fallout could be contained even if the office sector faces a deeper crisis.
The Kansas City Fed also stress-tested banks against a commercial real estate downturn on par with the 1980s and concluded that today’s institutions are better positioned to withstand the shock.
Meanwhile, the CMBS sector could find some relief as the Federal Reserve resumes rate cuts for the first time since last year. Futures markets are now pricing in a strong probability of three cuts in 2025, with further easing expected into 2026.
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