North American Commercial Real Estate 2025 Midyear Outlook

Morningstar DBRS published its North American Commercial Real Estate midyear outlook. Key highlights include the following:

-- Despite facing some volatility in the markets, the commercial real estate debt market has been fairly resilient in the first half of 2025 with higher issuance in our corporate real estate coverage and data center sectors, with issuance fairly consistent for the traditional CMBS products to that experienced in 2024.

-- While the Bank of Canada lowered its policy interest rate again in 2025, the U.S. Federal Reserve has held steady with no additional cuts in the first half of 2025. Much of the maturity defaults experienced in our CRE book are tied to higher interest rates coupled with asset level performance decline.

-- We saw delinquency rates continue to be high and downgrades tended to be associated with distressed office properties. In the latter half of 2025, we expect to see more of the same--steady issuance and defaults timed with loan maturities.