Lenders, CRE Owners Face Tough Choices As $957B In Commercial Mortgages Come Due This Year

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If you own commercial property—or lease space in a building owned by someone who does—2025 could be a pivotal year. Nearly $1 trillion in commercial real estate loans are set to mature this year, and many property owners are facing tough decisions as they try to refinance in a very different financial environment than just a few years ago.

A Wave of Loan Maturities Is Hitting the Market

According to the Mortgage Bankers Association, about $957 billion in commercial mortgage loans—roughly 20% of the total outstanding—are coming due in 2025. That’s up from $929 billion in 2024, and the increase is largely due to short-term extensions that were granted during the pandemic and in the early days of rising interest rates.

If you’re a business owner who also owns your building, or if your landlord is struggling with a commercial mortgage, this growing wall of debt could directly impact your operations.

Why This Matters to You

Loan refinancing is getting harder. According to Moody’s Ratings, only about 61% of loans maturing in Q1 2025 were successfully refinanced—a significant drop from historical norms. Many borrowers are finding themselves in a bind:

  • Original loan rates may be around 3%, but current rates are closer to 7%.
  • Property values have dropped, especially for office spaces, making it harder to qualify for refinancing.
  • Some lenders are now requiring additional equity or improvements to the property as part of the deal.

If your building’s mortgage is maturing—or if your landlord is struggling to refinance—it could affect everything from cash flow to your ability to renew your lease.

Delinquencies Are on the Rise

The number of delinquent loans is climbing. As of April, the delinquency rate for commercial mortgage-backed securities (CMBS) reached 8.17%, exceeding the peak seen during the pandemic. A significant portion of these loans are tied to office and retail properties.

This raises concerns for business owners who rely on stability in their commercial spaces. A distressed property can lead to deferred maintenance, management changes, or even foreclosure—creating major headaches for tenants.

Lenders Are Becoming More Selective

Lenders are closely evaluating borrowers before agreeing to refinance:

  • Are owners investing additional equity?
  • Has the property’s performance improved over the last two years?
  • Is there a realistic path to stabilizing the asset?

If the answer is no, refinancing may not be offered, or it could come with tough terms. As a business owner, it’s critical to know whether your landlord is well-capitalized and proactive—or if they’re falling behind.

What You Can Do

If you own your property:

  • Start conversations with your lender early if your loan matures in the next 12–18 months.
  • Evaluate whether refinancing is feasible, or if bringing in a capital partner makes sense.
  • Don’t wait—many lenders have little patience left for borrowers who’ve been slow to act.

If you lease your space:

  • Ask your landlord about their financing position—especially if your lease is long-term.
  • Review your lease terms for any clauses that could affect you if the property is sold or goes into default.
  • Consider backup plans if your space becomes unstable.

Looking Ahead: What Comes Next?

Although the Federal Reserve cut interest rates three times in 2024, long-term rates have remained stubbornly high. Many property owners were hoping for rate relief, but instead saw refinancing conditions worsen. The 10-year Treasury yield—which affects many commercial loan rates—is still hovering around 4–4.5%.

At the same time, some private lenders and debt funds have stepped in to offer financing where traditional banks have pulled back. These lenders tend to be more flexible—but also more expensive.

Despite the risks, many in the industry believe lenders will continue to work with borrowers where possible. A repeat of the Great Recession, where mass foreclosures flooded the market, seems unlikely—for now.

Final Thought

As a business owner, you don’t need to be a commercial real estate expert—but you do need to be informed. Whether you own your space or lease it, now is the time to understand how this maturing loan crisis could impact your operations, your landlord, and your long-term stability.

Being proactive today could help you avoid surprises tomorrow.

 

Source: SFBJ

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Florida Bank Loan Defaults Arise Amid Tariff Anxieties

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Hopes for a banking sector rebound after the election have been swiftly undercut by growing concerns over global trade and a fresh wave of uncertainty surrounding loan defaults—an issue already surfacing in Florida.

According to Federal Deposit Insurance Corp. data, the percentage of overdue and nonaccrual loans in Florida climbed from 0.52% at the end of 2024 to 0.70% in the first quarter of 2025. Over the course of 2023, troubled loans increased from 0.46% to 0.70%.

To manage the rising threat of loan losses, banks have allocated hundreds of millions of dollars to reserves over the past two quarters. Much of this caution centers around over-leveraged commercial real estate, particularly in Tampa Bay, where property values have dropped significantly since their post-pandemic highs. Some multifamily properties have already sold at steep losses—such as an apartment complex south of Gandy that changed ownership last month.

The broader impact of tariffs is expected to hit a wide range of commercial borrowers, especially businesses with heavy reliance on international supply chains.

“The range of uncertainty is far wider than it was just a month ago—there are many variables at play,” said Raj Singh, CEO of Miami Lakes-based BankUnited, during a recent earnings call. “The final outcome on tariffs is still unknown, and it will definitely have repercussions.”

BankUnited increased its loan loss reserves by $15 million last quarter, which Singh said should be adequate even if credit performance weakens beyond current forecasts. He mentioned that their risk models reflected slightly worsening conditions based on April data compared to March.

“With the current level of unpredictability, it makes sense to maintain some extra capital,” Singh added.

While the exact effects of tariffs on specific sectors remain unclear, one area expected to feel the impact early is industrial warehouse real estate, a category that has outperformed others in recent years.

John Corbett, CEO of SouthState Bank, said during the bank’s latest earnings call that their credit team identified about $200 million in industrial warehouse loans located near port cities—a relatively modest exposure for the $65 billion institution.

“Our credit team is taking a comprehensive look at the loan book—both top-down and bottom-up—meeting with clients and listening to their concerns,” Corbett said. “There’s no panic, but many clients are sensibly postponing capital investments.”

 

Source:  SFBJ

 

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Class B Malls Offer Prime Redevelopment Opportunity

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The future of Class B malls may increasingly depend on the trend of transforming underperforming properties into mixed-use developments, especially as new retail construction slows. These redevelopments aim to combine retail, lifestyle, entertainment, and essential services to better align with today’s consumer preferences.

There are approximately 250 Class B malls in the U.S., accounting for around 28% of all malls nationwide, according to real estate analytics firm Green Street. These malls are typically situated in suburban and secondary markets and often host a mix of mid-tier national and regional retailers within enclosed shopping formats.

Class B malls continue to trail behind Class A malls, which are nearing pre-2019 levels of foot traffic. While Class A malls are only about 4% below those benchmarks, Class B malls see foot traffic down by 9%, with occupancy around 89%, compared to 95% at Class A malls. Malls rated C have even lower occupancy rates, at under 72%.

Several factors contribute to the challenges facing Class B malls, including reduced sales per square foot, weaker tenant rosters, and declining foot traffic. Many are in markets where demographics and retail competition have shifted toward newer, more accessible centers.

Furthermore, many Class B properties suffer from outdated designs and increasing vacancies as anchor stores close and tenant mixes evolve. They also face rising competition from online retail and modern lifestyle centers offering a more engaging mix of retail, dining, and entertainment options.

Despite these challenges, Class B malls present strong potential for repurposing, as they are often available below their original development cost.

Reimagining these properties offers investors and developers the chance for strong returns while contributing to economic growth in local areas. For retailers, such revitalized spaces can attract higher foot traffic and offer better opportunities for customer interaction.

Redevelopment strategies being explored include integrating residential units, office spaces, and hospitality features; creating experiential retail destinations to appeal to younger consumers; establishing healthcare and community services; and converting spaces for logistics or data center use. Some developers are also transforming former anchor stores into fitness centers or indoor sports venues and enhancing malls with green areas and outward-facing storefronts.

Across the U.S., more than 50 mall redevelopment projects are currently underway, ranging from modest updates to large-scale, multi-billion-dollar transformations. One example is Hawthorn Mall in Vernon Hills, Illinois—a two-story super-regional center being converted into a dynamic mixed-use neighborhood with luxury housing, expanded dining and retail, and pedestrian-friendly design.

 

Source:  GlobeSt.

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CMBS Loan Losses Climb Sharply As Loss Severity Hits New High

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In March 2025, commercial mortgage-backed securities (CMBS) experienced a significant uptick in loan losses, with total losses reaching $128 million across six loans. This marks a sharp increase from February’s $79.7 million across seven loans. The average loss severity—the percentage of the loan balance not recovered—rose to 81.27%, up from 47.87% the previous month. (CMBS Loan Loss Report: Volume of Losses Increases in September 2024)

Over the past 12 months, there have been 188 disposed loans totaling $2.05 billion, incurring losses of $1.29 billion, resulting in an average loss severity of 62.97%. When considering only loans with a loss severity greater than 2%, the 12-month figures include 108 loans totaling $1.96 billion, with losses of $1.29 billion and a higher average loss severity of 65.79%.

Despite the increase in monthly losses, the 12-month moving average disposed balance decreased to $171.1 million in March from $193.3 million in February. However, the 12-month moving average loss severity continued to rise, reaching 62.97% in March from 61.96% in February. (CMBS Loan Losses Were Down in October | ORION INVESTMENT REAL ESTATE)

These developments indicate a concerning trend in the CMBS market, with rising loss severities suggesting that investors are facing more significant write-downs on defaulted loans. This situation may reflect broader challenges in the commercial real estate sector, including issues such as declining property values and increased vacancies. (CMBS Loan Loss Report: Volume of Losses Increases in September 2024)

 

Source:  GlobeSt.

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Loan Modifications Nearly Double As Extend & Pretend Tactics Surge

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Loan modifications—often labeled “extend-and-pretend” strategies for obvious reasons—have become a regular tool in the commercial real estate (CRE) sector. And according to a new analysis from CRED iQ, their use has increased sharply.

CRED iQ reviewed trends in modifications across various loan types, including CMBS, SBLL, CRE CLO, and Freddie Mac loans. The analysis, which looked at both recent trends and data over the past three years, found a significant uptick in these modifications.

Between March 2024 and March 2025, the volume of modified loans nearly doubled, jumping from $21.1 billion to $39.3 billion—an 86.3% increase. Just last month, $2 billion worth of modifications were made across 47 loans, marking the highest activity since May 2024.

It’s important to note that the data doesn’t cover commercial bank CRE loans, which are a major portion of the overall market. Even so, the figures provide insight into growing reliance on loan extensions. Modification sizes have ranged from as little as $11.3 million in July 2022 to as much as $2.4 billion in July 2023.

Many of these extensions stem from loans initially extended in 2024, now creating a wave of upcoming maturities. Expectations that Federal Reserve rate cuts might ease refinancing pressures have largely faded, leaving borrowers to manage rising debt costs on their own. In this environment, banks are eager to avoid labeling loans as troubled, so modifications are often the preferred route.

One example CRED iQ highlighted is Chicago’s Willis Tower. The 3.8 million-square-foot building had a $1.33 billion interest-only loan originally due in March 2022. After multiple one-year extension options, a recent modification extended the due date further—this time to March 2028. Despite this, the tower is performing decently, with an 83.1% occupancy rate and a debt service coverage ratio of 1.32.

So what does all this mean in a market without the relief of lower interest rates? CRED iQ suggests these trends reflect a broader change in CRE financing. The nearly $40 billion in modified loans is a signal of both caution and adaptability in the sector.

“The commercial real estate sector is at a turning point,” CRED iQ said, with the implications for investors and lenders still unfolding.

 

Source:  GlobeSt.

 

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Lenders Forcing Landlords To Swallow Higher Insurance Coverage Or Face Distress

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Commercial real estate distress is growing as more property owners struggle with their loans, and rising insurance costs are adding another challenge, especially for small landlords.

Insurance brokers and lenders predict that more borrowers will face force-placed insurance, which lenders apply when a borrower’s coverage lapses or is inadequate. This type of insurance is often 10 times more expensive than regular coverage, placing a heavy burden on small property owners.

Lenders impose force-placed insurance to protect their investments when a property is insufficiently covered against risks like natural disasters. This insurance, which typically covers fire and wind damage, is added to the loan, increasing monthly payments. Force-placed insurance becomes especially prevalent during times of financial distress, such as the 2008 Great Recession, and could become a bigger issue if the real estate market worsens.

The average cost of insuring commercial properties and apartments has risen sharply, leading to higher premiums that may force borrowers into bankruptcy or foreclosure. Some borrowers opt to keep force-placed insurance, as it’s cheaper than market-rate coverage. While force-placed insurance doesn’t directly trigger foreclosure, failure to pay these premiums can add to the loan balance, worsening the situation for both borrowers and lenders.

For properties with securitized loans, force-placed insurance can also lead to special servicing, where payments rise drastically. Though lenders are required to give borrowers 45 days’ notice before imposing force-placed insurance, many still struggle to secure appropriate coverage, especially smaller property owners who lack the resources of larger portfolios.

In the end, rising insurance premiums contribute to the growing financial strain on property owners, further complicating the already challenging landscape of commercial real estate.

 

Source:  Bisnow

 

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Loan Extensions Reach New Highs At $384B

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Lenders are continuing to extend loans, with $384 billion now set to carry over into 2025. This figure surpasses the $270 billion in loan extensions recorded for 2024, according to data from the Mortgage Bankers Association (MBA).

According to Aaron Jodka, research director for capital markets at Colliers, loan extensions now make up 40% of debt maturing this year. Colliers estimated this based on the MBA’s 2024 loan maturity report. While the analysis isn’t exact—since loans can be refinanced, renegotiated, or newly issued—it highlights the growing trend of loans not being paid off upon maturity.

Commercial Mortgage-Backed Securities (CMBS) and banks are the most likely to extend loans, Jodka noted. Of the CMBS loans maturing in 2025, 54%—equivalent to $125 billion—were initially due in previous years. Similarly, 44% of bank loans, or $199 billion, were carried over from past due dates. In contrast, life insurance and agency loans were largely paid off, reducing total maturities by $8 billion.

Multifamily, office, and alternative asset classes, such as self-storage and manufactured housing, are the top recipients of loan extensions. Office loans accounted for $85 billion in extensions, or 45% of the $187 billion in 2025 maturities. Multifamily properties had the largest extension volume at $97 billion, roughly one-third of the $310 billion in loans set to mature in 2025. Other assets saw extensions totaling $87 billion.

Among asset classes, industrial properties had the highest percentage of 2025 maturities carried over from prior years, with 55% being pushed forward. Given the sector’s strong fundamentals and high transaction volume, this trend is seen as a logical approach.

Jodka anticipates that a significant portion of 2025 maturities will be further extended into 2026 or beyond.

“Lenders are adjusting to market conditions and pricing shifts by forcing sales, initiating foreclosures, and exploring alternatives beyond loan renegotiations,” Jodka stated. “Still, $957 billion in loans will not be paid off this year, and a substantial portion will be deferred to 2026, when another $663 billion in loans come due.”

 

Source:  GlobeSt.

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CRE Debt Challenges Escalate, Threatening Banking Sector

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The U.S. banking system remains under pressure due to significant exposure to the commercial real estate (CRE) market, exacerbated by persistently high interest rates. As a result, banks face increasing risks as potentially troubled loans approach maturity, according to an analysis by Florida Atlantic University (FAU).

Since 2023, troubled debt restructuring for commercial construction, multifamily housing, and both owner-occupied and non-owner-occupied mortgages has surged, tripling to $18 billion in the fourth quarter of 2024. This marks a sharp increase from $6 billion recorded in the second quarter of 2023.

While more than half of this distressed debt stems from non-owner-occupied nonfarm and non-residential properties, the FAU report highlights “serious deterioration” in multifamily and commercial construction loans.

As of the fourth quarter, 59 out of the 158 largest U.S. banks face CRE exposure exceeding 300% of their total equity capital. FAU’s U.S. bank exposure screener identifies the most vulnerable financial institutions, including Flagstar Bank, Zion Bancorp, Valley National Bank, Synovus Bank, Umpqua Bank, and Old National Bank.

Across banks of all sizes, 1,788 institutions now have CRE exposure surpassing 300%, up from 1,697 in the third quarter. Nearly 1,000 banks have exposure exceeding 400%, 504 exceed 500%, and 216 surpass 600%. Meanwhile, the aggregate industry-wide CRE exposure remains at 132%, unchanged from the previous quarter.

Regulators have been urging banks to reduce their exposure, but doing so without signaling financial weakness presents a major challenge, according to Rebel A. Cole, a finance professor at FAU’s College of Business.

“To navigate this situation, many banks are resorting to an ‘extend and pretend’ approach, restructuring loans by extending their maturities under the same terms,” Cole explained.

This strategy allows lenders to postpone refinancing in hopes that interest rates will decline, making repayment more manageable in the future.

 

Source:  GlobeSt.

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Broward Jobs, Affordable Housing, Transportation Among Top Priorities For County

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Nearly 1,000 business and civic leaders gathered at the Broward Workshop’s 17th annual State of the County Forum on Wednesday to review the county’s economic progress and discuss plans for the future.

Held at the Broward County Convention Center, the event highlighted last year’s economic achievements while addressing pressing concerns such as job growth, housing affordability, and infrastructure development.

Employment Trends and Workforce Needs

Despite business expansion and growth in 2024, Broward County has 7,945 fewer jobs than it did at the same time last year. With an estimated 92,000 new jobs needed by 2030 to keep up with population growth, this decline presents a challenge.

However, the county still boasts a job surplus, with 35,152 open positions compared to 31,278 job seekers.

Infrastructure and Transportation Initiatives

Broward County Mayor Beam Furr emphasized the county’s commitment to improving public transit and infrastructure. One key initiative is a proposed commuter rail line extending to Deerfield Beach, aimed at alleviating road congestion and enhancing mobility.

Additionally, the ongoing Convention Center expansion and adjacent hotel project are proving to be valuable investments, with a strong lineup of industry events set to generate thousands of hotel stays in the coming years.

Furr also acknowledged the contributions of public sector employees, contrasting Broward’s approach with companies that prioritize productivity metrics over workplace empowerment.

The Housing Affordability Crisis

One of the biggest challenges facing Broward County remains access to affordable housing. More than half of residents are considered housing burdened, meaning they spend over 30% of their income on rent or mortgage payments.

“There are multiple factors driving this issue—an influx of Northerners moving to Florida, hedge funds purchasing starter homes, and limited land for new development,” Furr explained. “All of these put immense pressure on the housing market and workforce.”

The median home price in Broward reached approximately $454,000 in February, marking a 7% increase from the previous year.

Population Growth and Economic Mobility

Florida Chamber of Commerce President and CEO Mark Wilson warned that rising costs are driving younger residents out of the state. Among those aged 20 to 29, more people are leaving Florida than moving in—an indicator that job seekers, new families, and first-time homebuyers are struggling with affordability.

At the same time, Florida continues to experience substantial income migration. Between 2021 and 2022, the state gained $36 billion in net income, with $2 billion flowing into Broward County alone. The Florida Chamber projects the county’s population will grow by 261,000 by 2030, with the state adding 2.8 million residents overall.

Despite this economic growth, challenges remain. The state still has 713,000 children living in poverty, including 63,000 in Broward.

A Call for Collaboration

Wilson emphasized that bipartisan cooperation will be essential in addressing key issues such as infrastructure, housing, and education to support Broward’s growing population and business environment.

“People are tired of the political divide,” he said. “If we need to create 80,000 more jobs in Broward by 2030 to lift people out of poverty and support small businesses, we should all agree that this is a priority—regardless of political affiliation.”

With a strong economy, increasing population, and ongoing investments in infrastructure, Broward County stands at a pivotal moment. The challenge now is ensuring sustainable growth that benefits businesses and residents alike.

 

Source:  SFBJ

 

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Rising Insurance Costs Squeeze Commercial Real Estate

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A recent analysis by Moody’s reveals that for certain commercial real estate (CRE) properties, insurance expenses have doubled as a percentage of revenue since 2018.

Despite these rising costs, rent growth in many CRE sectors has helped offset the impact on net revenue and property values, albeit to a limited extent.

Over the past several years, escalating insurance rates—driven by inflation and the increasing effects of climate change—have been a growing concern. As previously reported by GlobeSt.com, insurance brokerage Marsh McLennan Agency has warned that property owners with significant exposure to last fall’s hurricanes could see rate increases between 50% and 100%.

Moody’s Findings

Moody’s analysis focuses on properties backing CMBS loans, categorized by insurance costs as a percentage of revenue. Only properties with data spanning 2018 to 2023 were included in the study.

  • Properties in the lower 50th percentile experienced an average increase of about 50 basis points.
  • The most impacted 1% of properties saw insurance costs rise from 7% of total revenue in 2018 to 13% in 2023.
  • Within this top 1%, the worst 5% saw costs jump from 4% to 8%.

Implications for Buyers, Lenders, and Investors

Although extreme cases remain a small subset, the findings signal a crucial need for buyers, lenders, and investors to prioritize insurance and physical risk assessments in due diligence. For asset managers, these cost increases can complicate budgeting, influence exit strategies, and even prompt requests for waivers on minimum coverage requirements from lenders.

On average, properties required an additional 1.3% annual rent growth just to maintain stable net operating income (NOI) and value. Properties in the worst-affected category faced an estimated 12% decline in NOI and value. For lenders, this equates to an implied loan-to-value (LTV) increase of nine percentage points, while the debt service coverage ratio (DSCR) could drop by 0.25x. Refinanced loans with higher interest rates would experience even steeper DSCR declines due to increased borrowing costs.

Geographic and Sector-Specific Trends

Geography plays a notable role, with the Gulf Coast—particularly Texas and Florida—showing a higher concentration of properties experiencing severe insurance rate growth. However, the issue is widespread, affecting metros across the East, Midwest, and South.

Among CRE sectors, multifamily properties saw the sharpest increase in insurance costs, rising from 7% of revenue in 2018 to 14.3% in 2023. Retail properties followed closely (8% to 12.8%), with hotels and offices both increasing from 5% to 10.4%. Industrial properties experienced the least impact, climbing from around 5% to 7%.

Interestingly, property size did not consistently correlate with higher insurance costs. However, despite rent growth helping to mitigate some of the burden, the median insurance growth rate in the top 100 metros has significantly outpaced revenue growth over the past six years.

As insurance costs continue to rise, stakeholders in the commercial real estate market will need to navigate an increasingly complex financial landscape, factoring in these growing expenses into their investment and operational strategies.

 

Source:  GlobeSt.

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