CRE Lenders & Borrowers Face Tough Choices as Distress Grows

Anica Petkovic • News • July 14, 2025 • Time reading: 2 min

In St. Petersburg, Florida, a damaged office tower—hit by a toppled crane during Hurricane Milton—might not return as office space. Despite the city’s tight 9.5% office vacancy rate, the site’s future could likely be luxury condos instead of another office building.

It’s a telling sign of today’s office market, where even cities with high demand face challenges bringing new office projects to life.

CRE Debt Distress Hits Record Highs

Five years after the pandemic began, commercial real estate (CRE) debt tied to vacant or outdated office properties remains under pressure.

According to Trepp, commercial mortgage-backed securities (CMBS) delinquency reached 7.13% in June, with the office sector hitting a record 11.08% delinquency rate. Many lenders are resorting to short-term maturity extensions, but experts warn that the traditional “wait-and-see” approach no longer works in today’s market.

“Those old strategies—loan modifications or covenant waivers—just aren’t effective anymore,” said Steven “Sonny” Ginsberg, co-founder at Ginsberg Jacobs.

Opportunity Zone Updates Advance

The U.S. Senate recently advanced its version of the Opportunity Zones (OZ) tax credit program, extending it for more than a decade and adding changes to how zones are designated.

The bill would limit OZ eligibility to lower-income Census tracts and remove the ability to designate areas above 125% of area median income. However, it doesn’t resolve a looming “dead zone” gap between the current program’s expiration and the new version’s start in 2027.

Growth Potential Near Panasonic’s Kansas Plant

In De Soto, Kansas, there’s still room for more development near Panasonic’s $4 billion electric-vehicle battery plant.

Located within Astra Enterprise Park—a former Army ammunition site spanning over 9,000 acres—the facility will occupy just 3% of the land. About 2,600 acres remain available for future projects.

Local leaders see it as a long-term opportunity, though some environmental cleanup is still underway and expected to continue through 2028.