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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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Extend-And-Pretend Created A New Wave Of Loan Maturities

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As rising interest rates have caused many commercial real estate (CRE) loans to approach default, borrowers and banks have been employing an “extend-and-pretend” strategy, where loan terms are renegotiated to avoid default and extend the timeline for repayment. However, a new research brief from Gray Capital, primarily focused on multifamily properties, suggests that this approach is coming to an end. Lenders and equity investors are growing frustrated with borrowers who have not yet secured additional capital or alternative financing to pay off their loans. They are eager to resolve the situation, as holding onto these increasingly risky assets is becoming unsustainable.

The strategy of “extend and pretend” has faced criticism. A report from the Federal Reserve Bank of New York noted that simply postponing financial issues in hopes of favorable rate changes is not a viable long-term solution. Instead, this approach has been increasing pressure on banks. In response, large banks have begun quietly offloading parts of their commercial real estate portfolios to avoid losses, particularly from office property owners who are unable to meet their mortgage obligations.

Gray Capital’s analysis, which incorporates data from the New York Fed and CoStar, predicts that a wave of loan maturities could peak in 2026 for CRE overall, with multifamily loans experiencing a surge in the third quarter of 2025. Gray also forecasts that the Federal Reserve will raise rates more gradually in the future, continuing to apply pressure on borrowers, particularly those with bridge or construction loans that have already been extended.

On a more positive note, Gray’s report sees signs of improvement in the multifamily market. Multifamily unit prices have increased, rising to about $200,000, up from a low of $175,000 in mid-2023. While cap rates have risen from 4.25% in early 2022 to 5.5% in 2024, they are expected to decrease in the coming years. CoStar’s projections suggest that loan maturities in the third quarter of 2025 will be 25% higher than their initial 2023 forecast. Additionally, multifamily construction is slowing, with fewer units being delivered and a sharp decline in new starts. This trend is leading to a more balanced supply and creating more opportunities for distressed investments.

 

Source:  GlobeSt.

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High Financing Costs, Looming Loan Maturities Among Top CRE Challenges

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The Counselors of Real Estate have highlighted ten current and emerging issues significantly impacting all sectors of real estate, with high financing costs and impending loan maturities topping the list.

Despite recent cooling inflation and the Federal Reserve’s first anticipated rate cut announced in September, high financing costs continue to burden the commercial real estate market. Investors, who had hoped for as many as five rate cuts this year, are facing disappointment, which is dampening expectations for commercial properties, according to James Costello III, chief economist at MSCI Real Assets.

“Higher costs undeniably complicate the assessment of market value and the feasibility of deals,” Costello stated. “On a brighter note, the sharp decline in transaction volume seen last year is beginning to stabilize.”

Nevertheless, Costello warned that transaction volume could dip again in the third quarter, emphasizing that rate cuts alone may not stimulate deal-making.

To reignite transaction activity, both buyers and sellers must engage in the market. Currently, many owners are hesitant to sell, while buyers are cautious due to high prices, often waiting for opportunities to acquire distressed assets.

The real estate sector is struggling to address a significant amount of impending debt maturities, as noted by Constantine Korologos, clinical assistant professor and principal at New York University’s SPS Schack Real Estate Institute. Almost $1.8 trillion in commercial real estate loans are set to mature by the end of 2026, according to Trepp.

Lenders have been extending and modifying maturing debt, anticipating lower interest rates, new equity capital, or improved net operating income (NOI). However, Korologos warns that this strategy has limits.

“If, or more likely when, these extensions reach their endpoint, lenders will face a growing number of challenging loans to manage,” Korologos explained. “Banks hold a large portion of this debt and have limited options due to regulatory constraints. They can’t keep extending loans without adequate capital reserves.”

For borrowers with near-term maturities, the new debt service payments could rise by 75% to even 100% compared to their previous loans. This increase in payment obligations elevates property values and complicates refinancing efforts as values reset.

“Even if interest rates decrease as expected, it may not suffice for borrowers facing maturity balances that are too high to refinance,” he added. “This scenario is likely to lead to a shakeout among less stable operators and owners lacking sufficient capital.”

 

Source:  GlobeSt.

 

 

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Regulators Crack Down As CRE Loan Losses Pile Up

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U.S. banks are grappling with increasing delinquencies in commercial real estate (CRE) loans, which climbed to 1.4% in Q2. This marks the seventh consecutive rise, driven by high vacancy rates and falling office building values. In response, banks are boosting loss reserves and slowing new loan issuance, with CRE loan growth slowing to 2.2% year-over-year in Q2.

S&P Global forecasts a peak in CRE loan maturities in 2027, with $1.26 trillion expected to come due. For 2024, $950 billion in CRE mortgages are maturing. Federal regulators are permitting loan extensions but are keeping a close watch on banks with high CRE exposure.

Recent M&A activity, such as Bank of America’s $2.9 billion acquisition of Washington Federal Bank’s properties, reflects increased regulatory attention. Despite this, current delinquencies are lower compared to the 2008 financial crisis, thanks to stricter underwriting standards.

The Federal Reserve is likely to cut interest rates soon, but with new CRE loan rates significantly higher than those maturing, the impact may be limited.

 

Source:  SFBJ

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