CMBS Distress Is Peaking & Here’s Why It Matters to Smart Real Estate

In June 2025, the special servicing rate for CMBS (Commercial Mortgage-Backed Securities) loans surged to 10.57% the highest since May 2013. This is not a fluke. It’s the third straight monthly increase and a loud signal that distress is rippling through the commercial real estate finance system.

Let’s break this down.

What’s Really Happening?

According to the data:

• Office properties are under the most pressure, with a special servicing rate of 16.38% a record high.
• Retail is next at 11.94%, its highest since early 2022.
• Multifamily, though the least distressed, is still impacted at 10.11% a notable uptick despite prior signs of improvement.

These numbers represent over $2.9 billion in loans transferred to special servicing, with more than half tied to office assets alone. Clearly, this is not sector-specific stress it’s systemic.

Why This Is Happening

Several converging trends are behind this wave of distress:

1. Maturing Debt: Properties financed during low-rate years are now facing refinancing at much higher interest rates.
2. Refinancing Headwinds: Lenders are tightening terms, and borrowers are struggling to meet new underwriting standards.
3. Stricter Credit Requirements: The bar is higher, and not everyone can clear it.
4. Large Portfolios Are Sinking Faster: Especially those exceeding $100M, where even a small performance dip can push them into special servicing.

What Does This Mean for Investors?

It means opportunity if you know where and how to look.

At NNG Capital Fund, we aren’t shaken by the noise in traditional CRE sectors like office and retail. Instead, we’re laser-focused on multifamily assets in stable, underserved markets like Middle Georgia, and on luxury residential developments in Northern New Jersey, where demand and exit velocity remain robust.

Why We’re Bullish on Middle Georgia Multifamily

We target 100+ unit value-add properties in areas like Macon-Bibb and Houston Counties, where:

• The economy is diversified, with employers like Amazon, Robins Air Force Base, GEICO, and Coca-Cola driving job growth.
• Occupancy hovers around 88.5%, offering upside with smart renovations and repositioning.
• Rents have grown by 2.3% YoY, and there’s strong demand from blue-collar tenants, students, and Section 8 recipients.

And while national multifamily distress ticks upward, our focused markets still show strong fundamentals and cash-flowing potential—backed by smart underwriting and local relationships.

Why Luxury Fix-and-Flips in Northern NJ Still Win

While CMBS loans collapse under the weight of poor risk management, we’re executing high-IRR projects in Bergen, Morris, Union, and Essex counties where:

• Demand for turnkey luxury homes priced between $1.5M–$3M remains strong.
• Our strategy is value-add: acquiring underpriced assets, executing design-forward renovations, and exiting quickly.
• Even with mansion tax shifts and affordability pressures, high-end buyers are still writing checks as seen with our recent $2M+ sale that closed in just 45 days.

We’re not in the business of speculation. We’re in the business of solving inefficiencies in distressed markets with data, design, and discipline.

Final Thoughts: Follow the Distress, But Don’t Chase the Fire

The spike in CMBS special servicing is a canary in the coal mine. It’s showing us where the pain is deepest but also where the best repositioning and acquisition opportunities lie.

Multifamily distress = discount buys.

Luxury housing gaps = rapid, high-margin flips.

In times like these, smart capital seeks value, liquidity, and executional edge not just yield. That’s what we deliver.

Ready to capitalize on this market?

Whether you’re an accredited investor seeking stable returns or someone looking to diversify away from volatile assets, we invite you to explore how NNG Capital Fund is turning market dislocation into investor opportunity.

Learn more at nngcapitalfund.com

Stay ahead of the cycle. Invest with insight.