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Commercial real estate (CRE) has faced a turbulent period over the past several years, buffeted by rising borrowing costs, shifting demand patterns across property types, and the ongoing effects of pandemic-era economic adjustments. 2025 stands out as a critical year, where delinquency, default, and foreclosure metrics reflect stress points in the market — but also signals of stabilization in some segments.
Understanding commercial foreclosure rates today requires not only examining headline figures, but also the underlying credit performance trends, maturity walls, lending behavior, property-specific dynamics, and macroeconomic influences. In this post, we explore:
What Are Commercial Foreclosure Rates?A commercial foreclosure occurs when a lender seizes commercial property from a borrower who cannot keep up with debt service or refinance a maturing loan. Foreclosure rates can be measured in several ways: the number of properties entering the foreclosure process, the share of loans in default or serious delinquency, or distressed loan volumes within structured instruments like CMBS (commercial mortgage-backed securities). Unlike residential foreclosure data — which is often reported in broad, periodic national datasets — commercial foreclosure information is more fragmented, reported through private analytics firms (e.g., ATTOM), industry associations (e.g., Mortgage Bankers Association), and CMBS servicers. Still, these sources consistently indicate a market under pressure in 2025. Commercial Foreclosures Have Risen SignificantlyFor several quarters leading into 2025, commercial foreclosures have remained elevated compared with prior years. In December 2024, commercial foreclosures were already among the highest monthly counts in recent memory, with 725 properties entering foreclosure — up 27% year-over-year — illustrating upward momentum in distressed CRE as 2025 began. California, New York, and Florida were among the states with the highest foreclosure counts in that period. ATTOM While comprehensive national figures for all of 2025 are still being compiled, headline indicators point to continued elevation, reflecting ongoing stress across parts of the market. Delinquencies: A Precursor to ForeclosureDelinquency trends — loans that are past due but not yet foreclosed — are a leading indicator of future foreclosures. According to the Mortgage Bankers Association (MBA), commercial mortgage delinquencies increased in the second quarter of 2025, with notable growth in delinquencies across key lender types, especially CMBS loans. Banks and thrifts saw very modest increases, but CMBS delinquencies at 30+ days past due rose significantly quarter-over-quarter. MBA In contrast, as of the third quarter of 2025, delinquency patterns showed a mixed picture compared to earlier in the year. While some lender segments — such as bank and thrift portfolios — saw slight declines in delinquencies, CMBS loan non-current rates ticked up. MBA This divergence hints at sectoral stress: institutional and structured debt markets (like CMBS) are showing more pronounced distress than traditional balance-sheet lenders — a dynamic that can foreshadow foreclosure actions if borrowers cannot cure delinquencies or refinance obligations. Foreclosure Counts Are Climbing in Certain MarketsBeyond broad delinquency measures, specific studies have documented rising foreclosure activity across the U.S. real estate landscape in 2025. Emerging datasets show that overall foreclosure starts — including both residential and commercial — have continued to rise annually, with foreclosure filings up approximately 15–20% in some periods of 2025 compared with the prior year. ATTOM Though most data sources mix residential and commercial filings, commercial foreclosures remain a meaningful subset of overall trends, especially in states with high cost burdens and tight credit conditions. Property Types Driving Distress Commercial real estate is not monolithic: the foreclosure and delinquency picture varies tremendously by property type. Office SectorThe office market — particularly secondary and tertiary properties — continues to be one of the most distressed segments. According to CMBS performance data, office loan delinquency rates reached historically high levels in 2025 for certain cohorts, exceeding even the peaks observed during the 2008 financial crisis. Reddit This stress reflects multiple factors: the growth of remote and hybrid work models reducing office occupancy demand, rising vacancy rates, and refinancing difficulties as leases expire without sufficient new income to support higher debt service. Many office owners face refinancing at rates substantially higher than their original borrowings, compressing cash flow and increasing default risk. Retail and IndustrialRetail property performance has generally been more stable than office, and industrial real estate — particularly logistics and warehouse space — has benefited from structural demand tied to e-commerce and supply chain expansion. As a result, delinquency and foreclosure risk in these sectors remain below the more troubled segments, though localized risk pockets exist. Multifamily Multifamily — typically a stable segment due to ongoing rental demand — has shown moderate delinquency upticks, but well-located and well-managed properties appear to be handling credit stress better than other sectors. MBA Why Are CRE Foreclosures Rising? 1. Interest Rate Environment One of the most visible influences on CRE financial stress is the higher interest rate environment that persisted through much of the early 2020s. While the Federal Reserve’s short-term policy rate moved lower at various points, longer-term borrowing costs remained elevated through 2025 relative to the ultra-low levels seen during the pandemic. High financing costs limit borrowers’ ability to refinance maturing loans, especially as existing debt comes due with interest reset at higher spreads. First Tuesday Journal 2. Maturing Debt “Wall” Commercial real estate faces a substantial refinancing requirement as many loans originated in the boom years of lower rates mature. Industry estimates point to nearly $1 trillion in commercial mortgage maturities in 2025, with an even larger wall ahead through 2027. S&P Global When borrowers cannot refinance at acceptable rates — particularly if property income has not grown sufficiently — lenders may move toward restructuring, foreclosure, or loan workouts. 3. Economic and Demand Shifts Broader economic slowdowns or weakness in property cash flows can contribute to delinquency and foreclosure. Office markets, for example, are grappling with structural demand declines due to hybrid work models, which reduces rent income and owner ability to service debt. Tourism-related sectors like lodging also experience volatility tied to consumer spending patterns and economic cycles, leading to uneven credit performance within the CRE portfolio. Regional Foreclosure Variations Foreclosure pressure is not uniform across the United States. Certain states and metros with higher concentrations of distressed property types or weaker economic fundamentals have seen more pronounced increases in foreclosure activity. For example, states like California, Florida, and New York have historically shown higher commercial foreclosure counts due to their large CRE inventories and regional economic dynamics. ATTOM Large metros with pronounced office inventory — such as downtown districts of major cities — also face elevated stress, as seen in localized reporting on distressed office buildings and foreclosure filings. Is the CRE Market Stabilizing?Despite clear signs of distress, multiple indicators in 2025 suggest the market may be finding some balance rather than sliding into broad-based collapse. Delinquency Improvement in Some Segments MBA’s latest performance surveys indicate that while overall delinquency and non-current loan balances remain above historical norms for certain property types, some categories — like banks and thrift portfolios — saw slight reductions in delinquency in the third quarter of 2025 compared with earlier periods. MBA This tempered distress suggests that lenders and borrowers are adapting, with workouts, extensions, or refinancing solutions mitigating some foreclosure triggers — albeit unevenly. Lending Conditions and Deal Flow Industry commentary from banking and real estate sectors also points to modest improvement in commercial real estate lending momentum, with tighter spreads and active deal flow bridging buyer-seller pricing gaps. MBA Newslink These dynamics imply that while stress remains, capital markets may be recalibrating rather than abandoning CRE financing altogether. What This Means for Investors and Market Participants For investors, lenders, and property owners, the 2025 foreclosure landscape demands nuanced interpretation: Risk Management Commercial real estate risk models must account for sector-specific vulnerabilities (e.g., office vs industrial), debt maturity exposures, refinancing feasibility, and localized economic demand. Strategic Opportunities Distressed assets — particularly older office buildings or underperforming retail centers — may offer acquisition opportunities for capital willing to reposition or repurpose properties. Watch the Interest Rate Outlook If long-term rates moderate, borrowing costs may ease, improving refinancing prospects and reducing future foreclosure risk. Forecast: What’s Ahead for Commercial Foreclosure RatesLooking toward the remainder of 2025 and into 2026, forecasters see mixed trajectories:
ConclusionCommercial foreclosure rates in 2025 reflect a CRE market in transition. While distress indicators like foreclosure filings and delinquency rates have risen compared with prior years, 2025 has not (yet) exhibited a systemic collapse akin to past crisis periods. Instead, the market is characterized by sectoral divergence: troubled office and structured debt segments, relative strength in industrial and select multifamily spaces, and cautious optimism from lenders adapting to this new environment. For stakeholders—owners, lenders, investors, and advisors—staying informed about foreclosure trends and the forces shaping them is essential. By tracking metrics such as delinquency rates, upcoming loan maturities, and regional foreclosure patterns, one can better assess risk, identify opportunity, and navigate the evolving landscape of commercial real estate finance. Citations 2025 Trends & Statistics
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