Industry Leaders Foresee Rising Volume of CRE Distress

Although the industry has yet to see the volume of distressed debt and properties that were characteristic of the S&L crash of the early 1990s and the Great Recession beginning in 2008, all signs imply that the volume is rising. As part of our 2025 Leadership Series, we asked top executives in commercial real estate what the distressed landscape might look like by the end of this year. Here, you’ll glean insights from Annemarie DiCola, CEO of Trepp; Keith Lampi, CEO and President, Inland Real Estate Investment Corporation; and Gregory MacDonald, CEO, Ballast Investments.

Are there specific property sectors where the volume of distressed loans coming to market might exceed the number of properties for sale in 2025? 

Annemarie DiCola: Yes. We are already seeing early signs in the data that the volume of distressed loans coming to market could outpace the number of properties for sale in certain sectors. In particular, according to a recent analysis by Trepp Chief Economist Dr. Rachel Szymanski, about $18 billion of delinquent CMBS loans are maturing within the next six months, which will add significant pressure to refinancing timelines. 

Office remains the most visible area of concern, given ongoing vacancy issues, higher capex requirements, and a slow leasing environment. But we’re also watching lodging and retail assets in select markets where operating costs have risen sharply and net operating income (NOI) recovery has been uneven. In these cases, distressed debt could surface faster than the underlying real estate can be repositioned or brought to market, creating a potential imbalance that savvy investors will monitor closely. 

Keith Lampi: We are looking closely at how loan maturities may continue to impact the market over time. So far, we have seen a willingness for lenders to extend loans and work with borrowers to rectify performance. We have also seen a handful of deals come to market due to a loan maturity, but pricing and demand for these assets remains robust. At this time, we don’t see distressed loans overwhelming the overall transaction volume in the market or any sort of systemic breakdown due to loan defaults, though it will continue to be important to watch closely for signs of deepening distress. 

Greg MacDonald: Multifamily is one of those sectors—especially in high-cost markets with rent control, aging infrastructure, or complex regulatory overlays. We’re seeing a significant number of loans either in technical default or under severe pressure. Some owners are holding out for conditions to improve, even when the fundamentals don’t support it. With that said, we have begun to see a loosening of this mentality, and more owners—and banks—are looking to exit from distressed positions. 

When distress surfaces, it’s often not just a capital issue. What are the strategies you’ve seen work best in stabilizing underperforming or inherited portfolios? 

Greg MacDonald: The first priority is getting clarity—on both the financials and the physical asset. That means inspecting every building and unit, verifying rent rolls, addressing deferred maintenance, and engaging with residents. These portfolios often have hidden operational problems that don’t show up on a balance sheet. Stabilization is about rebuilding trust, cleaning up inconsistencies, and installing systems that bring accountability. Once you have a stable structure in place, you can start unlocking value. We developed a playbook that was effective with the 2,200 unit distressed portfolio we acquired with Brookfield and are using a similar strategy with our management assignment at Parkmerced we were awarded in May.