S&P Global Ratings has published new research underscoring a bifurcated picture in structured finance credit: while global defaults across the asset class fell sharply in 2025, commercial real estate–linked exposures remain a focal point of concern. The ratings agency's "Instant Insights" commentary highlights that distressed and potentially impaired CRE loans continue to drive negative rating actions and elevated surveillance, particularly in pools with heavy office and retail concentrations.
Refinancing challenges are emerging as a central risk driver, according to S&P analysts. Higher interest costs and tighter credit conditions are making it harder for borrowers to roll over maturing debt on legacy assets with weaker cash flows. The combination of elevated financing costs and constrained lender appetite is creating a bottleneck for borrowers seeking to refinance properties that may have performed adequately in prior low-rate environments but now face stressed debt-service coverage ratios.
Valuation pressure on underlying collateral is compounding the refinancing headwinds. S&P's research notes that collateral valuations in certain CRE segments have declined, reflecting weaker fundamentals and reduced investor appetite. This valuation erosion limits borrowers' ability to secure replacement financing at terms that match legacy debt structures, forcing some to seek workout solutions or accept subordinate capital at punitive pricing.
The migration of loans into special servicing or workout status is another signal of ongoing stress beneath the headline improvement in structured finance defaults. S&P analysts point to this trend as evidence that while outright defaults may be falling across the broader structured finance universe, distress within CRE portfolios is manifesting in heightened servicing activity, loan modifications, and extended resolution timelines.
Office-heavy and retail-heavy loan pools are drawing particular scrutiny from S&P's surveillance teams. These segments face persistent occupancy and cash-flow headwinds, with office properties grappling with secular demand shifts and retail assets navigating competitive pressure from e-commerce and changing consumer behaviour. The concentration of these property types within certain structured finance transactions is a key factor in recent negative rating actions.
Beyond credit and refinancing risk, S&P is increasingly incorporating cybersecurity and operational risks into its qualitative assessments of CRE-linked transactions. The ratings agency notes that real estate operating companies and servicers rely heavily on third-party technology platforms for critical functions including rent collection, property management systems, and borrower reporting. Cyber incidents that disrupt these systems could impair cash flows, delay servicing actions, and reduce transparency into asset performance.
The potential for cyber disruptions to cascade through the CRE finance stack represents an evolving dimension of operational risk that S&P is now factoring into its surveillance frameworks. As property management and servicing functions become more digitised and reliant on external vendors, the exposure to technology failures and cyberattacks grows, introducing non-traditional risk vectors that can affect both collateral performance and the ability of servicers to manage distressed assets effectively.
S&P's research frames commercial real estate as a focal point for evolving default, refinancing, and operational risk within structured finance markets. While the headline decline in global structured finance defaults signals improving credit conditions in many sectors, the persistence of stress in CRE exposures—particularly office and retail—suggests that lenders, investors, and rating agencies will need to maintain heightened vigilance on this asset class as refinancing waves approach and operational risks multiply.