Almost one-fifth of outstanding commercial real estate debt is due to mature this year, a total of $929B in debt obligations that will require borrowers to refinance orsell properties, according to new figures from theMortgage Bankers Association.
The value of loans set to come due is up 40% from an earlier $659B estimate by the MBA,Bloomberg reports. The outlet attributes thesizable increase toan uptick in loan extensions and similar delays rather than an onslaught of new deals.
U.S. commercial real estate backs about $4.7T in debt, and investors, lenders and regulatorshave grown antsy as building values slide and loans mature, Bloomberg reported. Prices on commercial propertieshave fallen 21% from an early 2022 peak. Office prices have dropped most precipitously,sinking 35%.
Particularly in the office market, borrowers have largely been playing a game of loan extensions when possible, pushing harder decision points down the road.About 25% of office loans are coming due in 2024,according to the MBA.
While uncertainty around interest rates,unclear property values and questions aboutreal estate fundamentals have suppressedtransactions of late, it's more likely deals get done this year,Jamie Woodwell, head of commercial real estate research atthe Mortgage Bankers Association, told Bloomberg.
“This year’s maturities, coupled with greater clarity in those and other areas, should begin to break the logjam in the markets," Woodwell said in a statement.
This year could also bring more refinanced loans and fewer modifications on better-performing properties, Trepp Research Director Stephen Buschbomtold Bisnow earlier this year. Still, if loan modifications continue, it is a signal that the market’s health has yet to improve, he said.
“If we do start to see some refinances happen at maturity, that would be a really nice, positive sign to see,” Buschbom said. “But at this point, I don't think anybody's baseline scenario would be that they're expecting to see more refinances for office buildings than they did last year.”
