Red Alert: Multifamily CMBS Delinquencies Surge 500% as Market Breaks 7% Threshold
Warning Signs Flash in Commercial Mortgage Market
The commercial mortgage-backed securities (CMBS) market is flashing red alerts as delinquency rates surged to 7.03% in April 2025—a troubling level not seen since the early pandemic period of 2021. This sharp uptick signals broadening distress across multiple property sectors, challenging the conventional wisdom about which asset classes offer shelter in today’s volatile financing environment.
Mounting Distress by the Numbers
According to the latest Trepp report, overall CMBS delinquencies jumped 38 basis points from March and have skyrocketed nearly 200 basis points year-over-year. This translates to a staggering $41.9 billion in delinquent loan balances as of April.
While 91.62% of loans remain current, the concerning trend lies in the growing pool of early-stage delinquencies and matured loans facing refinancing challenges. Particularly worrisome is the 2.50% of non-performing balloon loans that have passed maturity dates without resolution—a figure that continues to climb as borrowers struggle with higher interest rates and tightened lending standards.
When factoring in loans that have matured but continue making interest payments, the adjusted delinquency rate reaches an even more concerning 8.37%. Though unchanged from March, this figure masks troubling sector-specific deterioration happening beneath the surface.
Multifamily and Lodging: The New Problem Children
Perhaps most alarming is the rapid deterioration in previously resilient sectors. The multifamily segment experienced the most dramatic month-over-month jump, with delinquencies soaring 113 basis points to 6.57%—representing a fivefold increase from just 1.33% one year ago. This dramatic shift challenges the long-held notion of multifamily as a defensive play amid economic uncertainty.
Lodging properties weren’t far behind, with delinquencies climbing 66 basis points to 7.85%. Both sectors have quickly emerged as areas of growing concern among investors who once viewed them as relatively safe havens compared to office properties.
Office Woes Continue Unabated
Despite the accelerating problems in multifamily and lodging, the office sector maintains its unenviable position as the most distressed commercial property type. Office delinquencies increased again to 10.28% in April, rising 52 basis points after a brief two-month reprieve in February and March. This renewed uptick suggests that the office sector’s structural challenges remain far from resolved, with remote work trends and corporate space reductions continuing to pressure property fundamentals.
Silver Linings in Retail and Industrial
Not all sectors showed deterioration. Retail properties offered a modest bright spot with delinquencies decreasing 70 basis points to 7.12%. While still elevated by historical standards, this improvement marks a welcome change after several quarters of mounting distress.
Industrial properties continue to stand as the market’s most resilient segment, with delinquencies ticking down to an impressively low 0.50% from 0.60% in March. This performance reinforces industrial’s status as the strongest commercial property sector, buoyed by sustained e-commerce demand and supply chain restructuring initiatives.
The Bigger Picture: Rethinking “Defensive” Strategies
The return to 7%+ overall CMBS delinquencies serves as a warning flare for commercial real estate investors and lenders alike. With stress now visibly spreading beyond the long-troubled office sector into multifamily and lodging, the commercial property distress narrative has evolved into a more complex and widespread challenge.
This shifting landscape demands that investors reconsider what truly constitutes a “defensive” sector in 2025’s evolving risk environment. The conventional wisdom that placed multifamily near the top of the safety hierarchy now requires reassessment as capital allocators navigate an increasingly complicated commercial real estate market.
As the year progresses, close monitoring of delinquency trends across all sectors will provide crucial insights into whether we’re witnessing a temporary spike or the beginning of a more persistent and widespread deterioration in commercial property fundamentals.
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