Commercial real estate delinquency is not crashing. It is grinding higher, quarter after quarter, like water finding cracks in a dam. At 1.58%, the CRE delinquency rate has more than doubled from its trough of 0.63% in Q3 2022. And it is now 0.62 percentage points above its 10-year average of 0.96%.
This is not a repeat of 2008, when CRE delinquencies exploded to 11.99%. This is worse in one specific way: the stress is structural, not cyclical. Office buildings are not temporarily empty because of a recession. They are permanently less occupied because of remote work. That distinction matters enormously for recovery timelines.
In a cyclical downturn, vacancy rates recover as the economy improves. Rents rebound. Property values follow. In a structural shift, the old equilibrium does not return. Landlords with 30-40% vacant office buildings are not going to see those tenants come back. The properties must be repriced, converted, or demolished.
CRE loans are not evenly distributed across the banking system. Community banks (assets under $10 billion) hold CRE concentrations averaging 280% of their risk-based capital. Some exceed 500%. The FDIC has flagged institutions above 300% for heightened supervisory attention.
This concentration means CRE stress does not hit the banking system uniformly. It hits small and mid-size banks hardest -- the same institutions that fund small business lending in their local markets. A wave of CRE defaults at regional banks could tighten credit availability for every business in those communities.
The CRE delinquency rate has risen from 0.63% in Q3 2022 to 1.58% today. That is a 151% increase from trough. The pace of increase has been remarkably steady: roughly 20-30 basis points per year since mid-2022.
The year-over-year change of +0.02pp may look modest. But CRE loans are slow to recognize. Banks extend forbearance, restructure terms, and push maturity dates rather than classify loans as delinquent. The reported delinquency rate almost certainly understates the true level of CRE credit stress.
This aggregate number blends very different stories:
A rising aggregate CRE delinquency rate driven entirely by office means the actual office delinquency rate is far higher than 1.58%. For banks heavy on office exposure, the portfolio-level picture is considerably worse than this number suggests.
How CRE compares to other delinquency categories:
| Loan Category | Current | Prior Qtr | QoQ Change | Year Ago | YoY Change |
|---|---|---|---|---|---|
| Business Loans (C&I) | 1.34% | 1.33% | +0.01pp | 1.27% | +0.07pp |
| Commercial Real Estate | 1.58% | 1.56% | +0.02pp | 1.56% | +0.02pp |
| Consumer Loans | 2.62% | 2.71% | -0.09pp | 2.76% | -0.14pp |
| Credit Cards | 2.94% | 2.98% | -0.04pp | 3.08% | -0.14pp |
| All Loans (total) | 1.48% | 1.49% | -0.01pp | 1.53% | -0.05pp |
The CRE loan delinquency rate is 1.58% as of Q4 2025, per FRED series DRCRELEXFACBS. This covers commercial real estate loans (excluding farmland) at all FDIC-insured commercial banks.
Office vacancies from remote work, higher interest rates making refinancing expensive, and slowing rent growth in multifamily. Loans originated in 2019-2021 at low rates now face refinancing at rates 200-400bps higher.
Community and regional banks with assets under $10 billion. Many hold CRE concentrations of 280-500% of risk-based capital. The FDIC flags banks above 300% for heightened supervision.
The peak was 11.99% in Q1 1991. At 1.58%, today's rate is far lower. But 2008 was a cyclical crisis; the current stress is structural (remote work), which means recovery could take longer.
Likely, yes. An estimated $1.5 trillion in CRE loans mature through 2025-2026, many requiring refinancing at higher rates. Office properties are the biggest risk. Industrial and necessity retail should perform better.
Federal Reserve FRED series DRCRELEXFACBS. Published quarterly by the Board of Governors as part of the Charge-Off and Delinquency Rates release.