Office Defaults Spike 9%—Here’s Why
The cracks in commercial real estate are getting louder.
Office loan delinquencies just shot past their financial-crisis peak, and it’s not just one-off buildings—entire portfolios are underwater.
That “recovery” everyone promised? It’s looking more like wishful thinking as lenders quietly prepare for a long, ugly unwind.
Across the board, signs of stress are stacking up: pending home sales are falling off a cliff, zombie properties are rising again, and the dream of lower rates is fading fast.
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Office CMBS Delinquency Rate Re-Spikes to Worst Levels of the Financial Crisis Meltdown
Since the beginning of 2023, the delinquency rate for office CMBS has spiked by 9 full percentage points. The office sector of commercial real estate has been in a depression for over two years, despite over a year of industry pronouncements that “the worst is behind us.”
Top 10 Counties with the Highest Zombie Foreclosure Rates in Q2
The top 10 counties include: Peoria County, Illinois (17.6%); Broome County, New York (13.8%); Cuyahoga County, Ohio (11.2%); Baltimore City County, Maryland (10.8%); Marion County, Indiana (10.5%); Lucas County, Ohio (9.9%) and Allen County, Indiana (9.8%).
When a Neighborhood Floods, Foreclosures Often Follow
The analysis found that of 16 wind events, six were followed by a rash of foreclosures. Of 10 wildfires, only one preceded a foreclosure wave. But out of 29 floods, 20 were followed by an unusually high number of foreclosures.
U.S. Home Vacancy Rate Steady for 13th Straight Quarter
222,358 properties were in the foreclosure process during the second quarter of 2025, up 4.8 percent from the first quarter of the year and 7,329 of those pre-foreclosure properties, 3.3 percent, were “zombie” properties
Pending Home Sales Plunge in All Regions
Supply of homes for sale across the US has surged to 4.4 months in April, the highest for any April since 2016. Pending sales of existing homes in the West plunged by 8.9% in April from March, seasonally adjusted, to the lowest rate in the data going back to 2011.
Why There’s Still No End in Sight for Higher Rates
For investors waiting on the sidelines, hoping for rates to drop, the message is clear: The “wait and see” approach could mean missing the window. As the fiscal pressures persist, elevated rates may become the new normal.
