CRE Loan Distress is Challenging the Financial Health of the Nation’s Banking Industry

Recently reported details of the findings from a comprehensive analysis of the 2nd quarter 2025 banking data by commercial real estate data, analytics, and valuation platform CRED iQ revealed that “while overall banking conditions remain sound, the report flags ongoing weaknesses in CRE segments.” Outstanding loans as of June 30, 2025, for key subsectors — construction and development (C&D), core CRE (office, retail, industrial and hotel) and multi-family reached $3 trillion, representing about 23% of all loans. The analysis covered “4,421 Federal Deposit Insurance Corporation (FDIC)-insured commercial banks and savings institutions, including community banks, with total assets of $25 trillion.” Key findings related to the three key subsectors that are experiencing moderate stress provide the percentage of quarter-over-quarter change for loans that are 30-89 days delinquent, 90-plus days delinquent, as well as the overall delinquency based on the two delinquent buckets and net losses. From April through June, net losses across the core CRE subsector totaled $3.92 billion, representing a 1% increase from the $3.88 billion net loss in the previous quarter. In contrast, net losses in both the multifamily and C&D subsectors rose proportionately higher. The total $902 million in net loss during the 2nd quarter from delinquent loans within the multifamily subsector represented an 18% increase compared to the $767 million total in the 1st quarter, and the $375 million net loss in the C&D subsector was a 12% increase from the $335 million net loss during the same period. CRED iQ’s findings “underscores a bifurcated CRE landscape;” and “while total loan growth supports optimism, elevated noncurrent rates in core CRE (office-heavy) and multifamily highlight refinance risks in a high-rate environment.”

Source:    https://commercialobserver.com/2025/09/distress-bank-cre-loans/