Despite signs of improvement in commercial real estate markets, including the office sector, distress remains prevalent in many metropolitan areas. CRED iQ analyzed the top 50 metropolitan statistical areas, focusing on the loans they track to determine the proportion of distressed loans. The distress rate is defined as the combined percentage of delinquent and specially serviced loans.
The 13 highest distress levels comprise all the metros with at least a 20% rate.
They are Minneapolis-St. Paul-Bloomington, MN-WI (49.7%); Providence-New Bedford-Fall River, RI-MA (45.4%); Rochester, NY (35.7%); Portland-Vancouver-Beaverton, OR-WA (32.9%); Chicago-Napeville-Joliet, IL-IN-WI (28.9%); Hartford-West Hartford-East Hartford, CT (28.6%); Denver-Aurora, CO (25.8%); San Francisco-Oakland-Fremont, CA (23.1%); Milwaukee-Waukesha-West Allis, WI (23.0%); Cleveland-Elyria-Mentor, OH (22.9%); Tucson, AZ (22.6%); Charlotte-Gastonia-Concord, NC-SC (21.9%); and Philadelphia-Camden-Wilmington, PA-NJ-DE-MD (20.1%).
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The lowest eight — all with distress rates below 3% — were Kansas City, MO-KS (2.6%); Las Vegas-Paradise, NV (2.2%); Jacksonville, FL (2.2%); Sacramento-Arden-Arcade-Roseville, CA (2.0%); Columbus, OH (1.3%); San Diego-Carlsbad-San Marcos, CA (0.4%). Both Salt Lake City, UT and San Juan-Caguas-Guaynabo, PR recorded 0%.
The overall distress rate for all loans in every market was 10.8%. The early distress signals include loans added to the special servicer’s watchlist for credit-related issues. Those issues include weak financial performance, low occupancy, high tenant rollover, and upcoming maturity risk.
A $1.28 billion, 147-property portfolio comprised mostly office and flex space across the country. Minneapolis had properties backing 13% of the mortgage loan, or $166.4 million. There were 19 properties in total, including 13 offices and six flex properties, in the metro.
The workspace loan had a July 2025 maturity data but was transferred to the special servicer because of an imminent monetary loan default. It was late but by less than 30 days of the February remittance data. There are two parts to the portfolio. One, which had 20.3% of the total mortgage balance, and three one-year extension options as underwriting. The second part, which was 79.9% of the total, had no extension options left.
According to a CRED iQ report earlier in March 2025, across Freddie Mac, Fannie Mae, Ginnie Mae, CRE CLO, and CMBS, distress for both conduit and single-borrower large loan deal types dropped for the first time in five months. The drop was 70 basis points, landing at 10.8% and breaking a streak of four consecutive record highs. However, office distress hit a new high of 19.3%.
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