Highest Levels of CRE Distress Found in Charlotte, Minneapolis & San Francisco

CRED iQ’s latest research highlights the trends in commercial real estate (CRE) distress across the United States. The data, based on current loan balances and the proportion of distressed loans in various markets, reveals significant regional differences in distress rates.

Cities with the Highest Distress Rates

Charlotte, North Carolina, leads the nation in CRE distress, with 24.8% of its loans classified as distressed. Other cities with high distress levels include Minneapolis (23.6%), San Francisco (20.1%), Trenton, New Jersey (17.6%), and Tulsa, Oklahoma (16.3%). By comparison, the average distress rate across all U.S. markets was 8.8% as of July.

Strongest Performing Markets

Not all markets face such challenges. Several metropolitan areas, including Tampa, Orange County, Riverside-San Bernardino, Nashville, and Austin, reported distress rates below 3%. These markets are performing well despite broader concerns about CRE distress.

Notable Distressed Loans

One of the most significant distressed loans in Charlotte is tied to Northlake Mall, a 539,813-square-foot property. This $152.3 million loan transferred to a special servicer in late 2019 due to a missed balloon payment and has since been classified as nonperforming. Northlake Mall is currently 72.4% occupied, with a previous valuation of $253 million in 2014.

Early Warning Signs of Distress

CRED iQ identifies early indicators of potential distress, including loans that have been added to servicers' watchlists. These loans often face credit-related issues such as poor financial performance, low occupancy, tenant turnover, or looming maturity risks. These factors can signal future distress in the CRE market.