CMBS Delinquencies Climb: Foreclosures & Distressed CRE Auctions Spike
By Majid Radaei, RadCRE · · Market Updates
CMBS delinquencies have surged to 6.78% in April 2026, triggering a significant uptick in commercial real estate foreclosures and distressed property auctions across the U.S.
CMBS Delinquencies Drive Foreclosure Surge
The U.S. commercial real estate market is witnessing a notable increase in distressed asset activity, primarily driven by escalating Commercial Mortgage-Backed Securities (CMBS) delinquencies. According to Trepp data, the overall CMBS delinquency rate climbed to 6.78% in April 2026, a substantial rise from 5.99% at the close of 2025. This upward trend is particularly pronounced in the office and retail sectors, which are grappling with structural shifts and higher interest rates.
Office properties continue to lead the delinquency charge, with an alarming delinquency rate exceeding 10% for CMBS loans backed by these assets. This translates directly into a higher volume of properties entering special servicing, initiating foreclosure proceedings, and ultimately hitting the auction block. Notably, New York City and San Francisco office markets have seen significant distress, with reports of major landlords facing defaults on loans tied to prominent buildings.
Increased Auction Activity and Price Discovery
The spike in delinquencies has naturally led to an increase in foreclosure auctions, presenting both challenges and opportunities for investors. Major commercial real estate auction platforms, including Ten-X and LoopNet, have reported increased listings of distressed assets. These auctions are becoming critical venues for price discovery, as the bid-ask spread remains wide in many direct sale transactions.
Recent high-profile examples include the foreclosure of the 29-story office tower at 1111 Fannin Street in Houston, which was seized by its CMBS special servicer in February 2026 after its loan entered default. Similarly, a portfolio of retail centers in the Midwest, previously owned by a private equity firm, was recently sold at a foreclosure auction for an estimated 30% discount to its pre-pandemic valuation. Such transactions highlight the market's recalibration.
Impact on Hospitality and Multifamily
While office and some retail sub-sectors bear the brunt of the distress, the hospitality sector is also experiencing a nuanced surge in foreclosures. Select-service hotels in tertiary markets, which struggled with post-pandemic occupancy recovery and rising operating costs, are facing refinancing challenges. Data from STR indicates that RevPAR growth has decelerated in many secondary and tertiary markets, making debt servicing more onerous for properties underwritten at lower interest rates. However, prime full-service hotels in major gateway cities continue to show resilience, with fewer instances of significant distress.
Multifamily, generally considered a more stable asset class, is not immune, especially properties with floating-rate debt that were acquired at aggressive valuations during the low-interest-rate environment. CoStar data points to an uptick in loan defaults for some multifamily portfolios, particularly in markets experiencing significant new supply or rent concessions.
RadCRE Perspective
"What we're witnessing is the inevitable repricing of assets that were over-leveraged during a period of artificially low interest rates. The headline CMBS delinquency figures, while concerning, don't tell the whole story. The real opportunity is not in blindly chasing every distressed auction, but in understanding the underlying asset quality and the capital stack failures. Many of these foreclosures are not a reflection of a fundamentally flawed property, but rather a mismanaged capital structure or a poorly chosen lender. For example, we're seeing owners who took out bridge loans at SOFR + 500-600 bps during the boom now facing SOFR rates around 4.31%, pushing their all-in rates upwards of 9-10%, which simply isn't sustainable for many asset classes at today's income levels.
At RadCRE, we're actively advising clients on how to navigate this environment. For buyers, it’s about having a clear acquisition strategy, access to capital—whether it’s traditional senior debt in the SOFR + 300-400 bps range, or structured equity solutions with mezzanine yielding 12-18% for the right deal. For owners facing distress, it's about proactively negotiating with special servicers or securing preferred equity to cure defaults, rather than waiting for the auction block. The market is bifurcating; there are great deals to be had, but only for those who can accurately underwrite potential value-add and execute a robust recapitalization or acquisition plan with speed and certainty of close."
RadCRE continues to closely monitor these market dynamics, offering bespoke financing solutions and investment advisory for clients navigating the evolving distressed asset landscape.
Tags: commercial real estate foreclosure, distressed assets, CMBS delinquency, CRE auctions, hotel investment sales, CRE capital markets
Sources: Trepp, CoStar, STR, GlobeSt.com, Commercial Observer