Trepp | The CRE Rundown – The Big Picture (July 24, 2026)

(excerpt) Retail sales increased in May for the fourth straight month, while consumer sentiment—as measured by the University of Michigan’s monthly survey of consumers—fell to a record low. How, then, are consumers financing their spending?

The answer had been credit cards. Card balances grew in March and April at the strongest back-to-back pace in three years, but they fell by a 4.7% seasonally adjusted annualized rate in May, with the decline likely the result of repayment after heavy spring borrowing. That suggests spending is safe for now, though broader inflation pressures remain a risk.

For commercial real estate, the exposure to weaker spending sits most clearly in the retail property sector. CMBS loans against properties catering to retailers that focus on discretionary spending are carrying double-digit delinquency rates, while formats serving daily needs are running near 2%. That gap could widen if consumers ease spending.

Of course, one month of data settles little, as monthly readings are volatile. Besides, May’s numbers are preliminary. Averaged over three months, card balances still grew faster than they did last year. What the May reading changes is the direction of the question. Through April the question was how long could households keep borrowing at that pace. Now, it’s whether the slowdown will impede spending. The spending data suggests not yet.

Meanwhile, consumer sentiment remains about one-fifth below its level of a year ago, with consumers naming high prices as a drag on their finances.

Retail property loans are a key channel through which shifts in consumer finances reach commercial real estate. Trepp’s retail property data show the strain is already sorted by format.

Outlet centers carry the highest delinquency rate in the dataset, but that’s driven by a small number of loans. Enclosed malls run above 10%.

More essential retail formats generally perform better. Neighborhood and convenience centers show delinquency rates near 2%, evidence that properties serving daily needs are holding up.

Properties focused on discretionary spending would be impacted first by softer consumer spending. Securitized loans against them already carry relatively high delinquency rates.

The formats serving daily needs are among the last expenses households cut, and their loan performance reflects that stability.

Compliments of Trepp– a Premium Member of the EACCNY