Lenders Navigate $957 Billion in Maturing CRE Debt Amid Tightening Conditions

 Lenders Navigate $957 Billion in Maturing CRE Debt Amid Tightening Conditions

Below if an overview of the rent article on Bizjournals.com. 

The commercial real estate industry is staring down a wall of maturing debt in 2025—nearly $957 billion in loans are set to come due this year. With tighter credit markets, declining property values, and rising interest rates, both borrowers and lenders face increasingly complex decisions on how to handle expiring loans.

A Refinancing Wall with Fewer Options

Many of these loans originated during a low-rate era and were underwritten with more optimistic assumptions. Today’s environment is different. Cap rates have expanded, valuations have come down, and lenders have pulled back. Refinancing into new debt—especially on office, retail, and hospitality properties—can be difficult or even impossible without an infusion of new equity.

The result: short-term extensions are becoming the most common workaround. Lenders are hesitant to write off assets or take properties back unless absolutely necessary. Instead, they’re working with borrowers to buy time—often through 12-to-24-month maturity extensions—in hopes that rates stabilize and values recover.

Property Values Are Working Against Borrowers

One of the biggest challenges is the erosion of collateral value. Many properties are now worth less than they were five or ten years ago when the loan was issued. This means borrowers are facing much lower loan-to-value thresholds, requiring either additional equity, loan write-downs, or alternative financing strategies.

Lenders, too, are under pressure. Extending non-performing loans may delay recognition of losses, but it also reduces liquidity and drags down portfolios. Still, with few distressed buyers in today’s market, repossession can be even more costly.

Sector Breakdown: Who’s Most Exposed?

Not all asset types face the same risks:

• Office properties, especially Class B and urban buildings, remain the most stressed due to persistent vacancy and remote work trends.

• Retail assets are split—essential retail remains stable, while older or poorly located properties struggle.

• Hospitality is highly market-specific and heavily impacted by operating volatility.

• Industrial and multifamily continue to outperform, though even these sectors are not immune to higher refinance rates.

Strategic Decisions Ahead

Borrowers should be engaging lenders early, ideally six to twelve months before maturity. Proactive communication, updated financials, and clear business plans can go a long way toward securing favorable extensions or modifications.

For lenders, this period calls for balance—maintaining underwriting discipline while working through problem assets pragmatically. Prioritizing extensions on properties with long-term viability is key.

A Market-Defining Year

The sheer volume of maturing debt in 2025 could define the next phase of the commercial real estate cycle. Whether the market sees a wave of distress or a soft landing depends largely on how lenders and borrowers manage these upcoming maturities.

For now, the industry appears to be favoring extensions and restructuring over repossession—but with so much at stake, that approach may be tested in the months ahead.

Weitz Take: If you have read this blog, none of this is surprising: distressed numbers rising; "punting" into the future and awaiting a Fed rate cut is the new norm. Will it work for the parties involved? Time will tell I suppose, but it won't be without some financial carnage for some involved. I still would like to see these numbers improve significantly before I recommended buying any property that 1) wasn't in a growing market and/or 2) has tremendous upzoning potential from its current property usage. 

For more information on Investing in Snohomish County Commercial Real Estate, send me a message anytime. 

Scott Weitz

Scott@Weitzcommercial.com

t: 206.306.4034