Commercial Real Estate Loan Maturities Create Growing Pressure on Borrowers and Lenders

 

2025 Commercial Real Estate Loan Maturities Create Growing Pressure on Borrowers and Lenders

The commercial real estate market is facing a critical juncture as a significant volume of loans come due in 2025, potentially triggering a wave of financial strain for borrowers holding distressed properties.

According to a February survey by the Mortgage Bankers Association, roughly 20% of the $4.8 trillion in outstanding commercial mortgages—about $957 billion—is scheduled to mature this year. This marks an increase from the $929 billion that matured in 2024. The rise in maturing debt is largely attributed to the numerous short-term extensions granted during the Covid-19 pandemic and the period of rapidly rising interest rates that followed.

Compounding the issue is the growing share of loans that are delinquent or at risk of delinquency. Moody's Ratings reports that its CMBS Conduit/Fusion Delinquency Tracker climbed to 7.87% in March, nearing the pandemic peak of 7.95% seen in June 2020. In March alone, $2.76 billion in loans became delinquent, with office properties representing nearly 29% of that figure, followed by retail at 26.7% and hotel loans at 9.6%.

Borrowers are facing tough negotiations, especially those with legacy loans carrying interest rates of around 3%, now confronting potential refinancing rates closer to 7%. This challenge is compounded by declining property values—particularly in the U.S. office market, where values have dropped by more than 20% in some segments.

Interest rates remain a key variable. Despite three rate cuts by the Federal Reserve in 2024, the Fed has so far held rates steady in 2025. Chairman Jerome Powell recently noted that the Fed is closely watching developments in tariff negotiations with key trading partners. The Mortgage Bankers Association highlighted that many commercial property owners hoping to benefit from lower rates after last year’s Fed cuts were disappointed, as longer-term rates simultaneously rose by an equivalent margin. This has resulted in further loan extensions into 2025. The association forecasts that long-term rates will stay rangebound for now, making the refinancing landscape even more challenging.

"I suspect that this time around, despite the looming maturity wall, lenders will continue to work with borrowers as best they can to slow play through this situation," Krawitz said. "Everyone benefits immensely by not unnecessarily forcing someone’s hand."

WEITZ- This has been an ongoing issue for the last few years and the market keeps 'kicking the can down the road'. None of this surprises us, but the depth and degree of the distress is staggering. As we have said for months (if not years), the intermediate term future of the market will certainly be interesting....especially if we start to see some bank failures/ distress....which frankly we expect. 

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Weitz Commercial

Scott Weitz

Scott@WeitzCommercial.com

T: 206.306.4034 (text first please).