Delinquencies are soaring past 12%, yet loan originations are up 50%. Inside the starkly divided reality of the 2026 commercial real estate market.
Whatever happened to the post-Covid-19 commercial real estate crisis? It depends on your perspective. Delinquencies on U.S. office-building loans are at an all-time high, with rates exceeding 12%, notes industry watcher Trepp.
Loan originations across the asset class jumped by half year over year in the first quarter of 2026, according to U.S. Mortgage Bankers Association (MBA) data. “It’s a tale of two markets,” said Lonnie Hendry, Trepp’s chief product officer, “increasing distress but also record-setting issuance.”
The desire for amenities has replaced that for “location, location, location” as corporate tenants pay more for newer, flashier premises. “You’ll have one building with high vacancy, and someone is starting construction next door,” said Jim Costello, co-head of real-assets research at MSCI.
B-quality venues built or financed before 2022 are finally confronting their value at 2026 interest and occupancy rates, Hendry noted: “A $10 million building with 60% occupancy becomes a good performer if it’s sold for $3 million.”
Non-office demand has buoyed the sector. Frenzies in financing for health care facilities (up 209% in the first quarter) and retail (up 148%) are offsetting a continued flat line in office-building financing, according to MBA figures. “This downturn turned out to be modest, except for office space in six major metros,” Costello assesses.
An increasingly diverse field of lenders is cushioning financial impacts. Banks now account for less than 40% of commercial real estate loans, according to the MBA; the rest are spread across a panoply of securitized instruments, institutional investors, and dedicated debt funds.
MSCI’s Costello said the diverse lender base is fighting for borrowers, potentially lowering costs. “There’s so much competition now that lenders might go for a tighter spread.”
This article appears in the June 2026 issue of Global Finance Magazine.
