Could Rising Delinquency Rates Be a Warning Sign for Commercial Real Estate?

A new report from the Mortgage Bankers Association (MBA) is raising eyebrows in the commercial real estate world. According to MBA’s Q1 2025 Commercial Delinquency Report, late payments on commercial mortgages are on the rise and while the overall numbers are still relatively low, experts say the trend deserves attention.

“Delinquency rates increased across all major capital sources this past quarter,” said Reggie Booker, Associate VP of Commercial Real Estate Research at MBA. “It’s a signal that some parts of the market especially those struggling to refinance are beginning to feel real pressure.”

Who Holds the Debt—and How Are They Doing?

MBA’s report focuses on five key types of commercial real estate lenders:

• Banks and thrifts
• Commercial mortgage-backed securities (CMBS)
• Life insurance companies
• Fannie Mae
• Freddie Mac

These five sources together account for roughly 80% of all commercial real estate mortgage debt in the U.S. Each tracks delinquencies in its own way, so the numbers aren’t directly comparable but they still paint a broader picture of stress in the market.

Here’s a snapshot of where things stood at the end of Q1 2025, based on unpaid principal balance (UPB):

• Banks and thrifts: 1.28% of loans were either 90+ days late or in non-accrual, ticking up by 0.02% from Q4 2024.
• Life insurance companies: 0.47% of loans were 60+ days late, a 0.04% increase.
• Fannie Mae: 0.63% delinquent (60+ days), rising 0.06%.
• Freddie Mac: 0.46% delinquent (60+ days), also up by 0.06%.
• CMBS: 6.42% were 30+ days late or in real estate-owned (REO) status, jumping by 0.64%.

The most significant spike occurred in CMBS loans, which typically serve properties that don’t have the same refinancing flexibility as loans held by banks or agencies. Experts say this increase is an early warning sign that certain sectors such as office buildings and retail centers are facing real financial headwinds.

Why the Numbers Matter

The way each lender reports delinquencies varies. For example, Freddie Mac doesn’t count loans in forbearance as delinquent as long as the borrower is making agreed-upon payments. Fannie Mae, on the other hand, marks those same loans as delinquent. This makes it tricky to compare numbers side by side, but the upward trend across all sources is what’s most telling.

It’s also important to note that construction and development loans often used for residential projects—aren’t included in the core data here, even though regulators sometimes lump them under the broader commercial real estate umbrella. However, owner-occupied commercial properties are included in the bank and thrift statistics, adding another layer of nuance.

What This Means for the Market

While the current delinquency rates are nowhere near crisis levels, the direction they’re moving in could point to deeper troubles ahead, especially for properties that are difficult to refinance, underperforming, or located in weaker markets.

If these trends continue through the rest of 2025, it could signal tightening credit conditions, declining asset values, or increased stress for borrowers trying to navigate high interest rates and uncertain tenant demand.

Bottom Line:

Delinquencies are still modest across most segments of commercial real estate, but the rising figures particularly in the CMBS sector suggest some cracks are beginning to form. For investors, lenders, and property owners, it may be time to keep a closer eye on risk. For more information about finance visit Nadlan Capital Group.