- CRE loan past-due and nonaccrual (PDNA) rates rose to 1.49% in Q1 2025—the highest since 2014—highlighting mounting financial stress in the sector.
- Multifamily loan delinquencies posted the steepest climb, jumping 88 basis points year-over-year to 1.47%.
- Despite performance concerns, CRE loan growth remains weak, with total and lease balances inching up just 0.5% quarter-over-quarter.
Loan Pressure Builds
The commercial real estate sector continues to face escalating pressure, with the FDIC’s Q1 2025 data revealing notable deterioration in loan performance, reports GlobeSt. While the overall PDNA rate across all FDIC-insured institutions sits at a still-manageable 1.59%, the CRE segment is flashing red.
Multifamily Leads The Decline
The most significant rise came in the multifamily category, where PDNA rates jumped to 1.47%, the highest in over a decade. This increase comes as rent growth slows, operating costs climb, and refinancing challenges mount in a higher-rate environment.
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By The Numbers
- Construction and Development Loans: $478.3B outstanding; 0.81% noncurrent
- Nonfarm Nonresidential Loans: $1.85T outstanding; 1.36% noncurrent
- Multifamily Loans: $638.9B outstanding; 1.05% noncurrent
Short-term delinquencies (30–89 days past due) remain low across all CRE categories, suggesting that stress is currently concentrated in longer-term defaults rather than a surge in newly troubled loans.
Early Signs Of Losses
Charge-offs remain limited but are increasing modestly:
- Construction & Development: 0.07%
- Nonfarm Nonresidential: 0.21%
- Multifamily: 0.10%
Bank-owned real estate, a common indicator of foreclosure activity, totaled nearly $2.9B across all CRE types, reflecting rising asset repossessions.
Some Silver Linings
- Nonfarm nonresidential lending rose 1.2% year-over-year.
- Unrealized securities losses fell to $43.9B, down 12.4% QoQ and 18.8% YoY—a welcome reversal after 2023’s banking turmoil.
Banking Sector Stability
Despite the pressure, broader banking system stability is holding—for now. Only one community bank failed in Q1, and the total number of FDIC-insured institutions declined by 24, largely due to mergers and reclassifications.
Why It Matters
Rising delinquency rates—especially in multifamily and nonresidential CRE loans—underscore growing financial stress as property values adjust and refinancing becomes more difficult. For lenders and investors, this trend threatens loan books, portfolio returns, and broader financial stability.
What’s Next
Market watchers will be closely tracking Q2 data to see whether PDNA rates continue rising. If performance worsens, expect tighter credit conditions, rising foreclosures, and growing scrutiny of bank CRE loan exposure in the second half of 2025.
