{"id":5110,"date":"2024-02-04T02:09:24","date_gmt":"2024-02-04T02:09:24","guid":{"rendered":"https:\/\/frankbuysphilly.com\/2-trillion-in-commercial-debt-is-coming-due-what-does-that-mean-for-the-industry\/"},"modified":"2024-02-04T02:09:24","modified_gmt":"2024-02-04T02:09:24","slug":"2-trillion-in-commercial-debt-is-coming-due-what-does-that-mean-for-the-industry","status":"publish","type":"post","link":"https:\/\/frankbuysphilly.com\/2-trillion-in-commercial-debt-is-coming-due-what-does-that-mean-for-the-industry\/","title":{"rendered":"$2 Trillion in Commercial Debt is Coming Due\u2014What Does That Mean for the Industry?"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div :class=\"{ 'hidden': $store.proContent.showFullPrompt() }\">\n<section class=\"px-4 relative border border-slate-200 mobile-toc lg:hidden\" x-data=\"{open:false}\">\n<button x-on:click=\"open = !open\" class=\"flex items-center gap-4 my-2 border-none w-full\"><br \/>\n<svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-6 w-6\" fill=\"none\" viewbox=\"0 0 24 24\" stroke=\"currentColor\" stroke-width=\"2\"><path stroke-linecap=\"round\" stroke-linejoin=\"round\" d=\"M4 8h16M4 16h16\"\/><\/svg><\/p>\n<p class=\"font-semibold text-slate-800 text-base m-0 js-toc-ignore\">In this article<\/p>\n<p><\/button><\/p>\n<\/section>\n<p><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/commercial-real-estate-fundamentals\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Commercial real estate<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0has had a few rough years, and it seems like things won\u2019t be getting better anytime soon. The sector is set for a potential rise in defaults, as higher interest rates have increased the costs of refinancing.<\/span><span data-preserver-spaces=\"true\">\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">And with $2.8 trillion due between now and 2028, more landlords could be feeling the crunch. According to\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.trepp.com\/trepptalk\/cre-mortgage-maturities-debt-oustanding-2.81-trillion-coming-due-by-2028\" target=\"_blank\" rel=\"nofollow noopener\"><span data-preserver-spaces=\"true\">data firm Trepp<\/span><\/a><span data-preserver-spaces=\"true\">, commercial debt maturities are expected to balloon in the next few years. While many loans were extended or refinanced, the clock is slowly ticking for the CRE sector as those extensions are coming due.\u00a0<\/span><\/p>\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Worst Commercial Slump in the Last 50 Years<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">The CRE market has been struggling to regain its footing since the start of the pandemic, especially in office space. When the pandemic hit, many office spaces emptied, forcing landlords to make deals to delay payments until things recovered.<\/span><\/p>\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"972\" height=\"321\" src=\"https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/image1.jpeg?twic=v1\/cover=972:321\/max=1000\" alt=\"Commercial Mortgage Maturities by Lender Type (2023-2028) - Trepp\" class=\"wp-image-165891\" title=\"$2 Trillion in Commercial Debt is Coming Due\u2014What Does That Mean for the Industry? 2\" srcset=\"https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/image1.jpeg?twic=v1\/cover=972:321\/resize=972\/max=1000 972w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/image1.jpeg?twic=v1\/cover=972:321\/resize=300\/max=1000 300w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/image1.jpeg?twic=v1\/cover=972:321\/resize=768\/max=1000 768w, \" sizes=\"(max-width: 972px) 100vw, 972px\"\/><figcaption class=\"wp-element-caption\"><em>Commercial Mortgage Maturities by Lender Type (2023-2028) \u2013 <a href=\"https:\/\/www.trepp.com\/\" target=\"_blank\" rel=\"nofollow noreferrer noopener\">Trepp<\/a><\/em><\/figcaption><\/figure>\n<p><span data-preserver-spaces=\"true\">Unfortunately for those invested in the office arena,\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/the-real-world-impacts-on-remote-work-and-what-it-did-for-investors\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">remote and hybrid working<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0is now becoming the norm, with many businesses downsizing their office space or even becoming fully remote.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Now that the CRE debt is coming due, landlords are starting to squirm. Because of how commercial mortgages are structured, when the debt matures, the principal must be paid off in full or refinanced.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">This has led to one of the\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.imf.org\/en\/Blogs\/Articles\/2024\/01\/17\/us-commercial-real-estate-remains-a-risk-despite-investor-hopes-for-soft-landing\" target=\"_blank\" rel=\"nofollow noopener\"><span data-preserver-spaces=\"true\">steepest commercial real estate price declines in the last 50 years<\/span><\/a><span data-preserver-spaces=\"true\">, a group of economists at the International Monetary Fund (IMF) found. This can largely be attributed to higher interest rates, steep monetary policy tightening, and stricter bank lending standards, according to the IMF.<\/span><\/p>\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"832\" height=\"589\" src=\"https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/image2.jpeg?twic=v1\/cover=832:589\/max=1000\" alt=\"Commercial Prices During Monetary Tightening Cycles - International Monetary Fund\" class=\"wp-image-165892\" title=\"$2 Trillion in Commercial Debt is Coming Due\u2014What Does That Mean for the Industry? 3\" srcset=\"https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/image2.jpeg?twic=v1\/cover=832:589\/resize=832\/max=1000 832w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/image2.jpeg?twic=v1\/cover=832:589\/resize=300\/max=1000 300w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/image2.jpeg?twic=v1\/cover=832:589\/resize=768\/max=1000 768w, \" sizes=\"(max-width: 832px) 100vw, 832px\"\/><figcaption class=\"wp-element-caption\">Commercial Prices During Monetary Tightening Cycles \u2013 <a href=\"https:\/\/www.imf.org\/en\/Home\" target=\"_blank\" rel=\"nofollow noreferrer noopener\">International Monetary Fund<\/a><\/figcaption><\/figure>\n<p><span data-preserver-spaces=\"true\">While the office sector has been the hardest hit, the entire market has felt the sting over the last few years thanks to a souring CRE market. Vacancy rates in\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/finding-multifamily-properties\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">multifamily homes<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0have increased, and rent growth is expected to decline in the coming year, according to\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.cbre.com\/insights\/books\/us-real-estate-market-outlook-2024\/multifamily\" target=\"_blank\" rel=\"nofollow noopener\"><span data-preserver-spaces=\"true\">CBRE<\/span><\/a><span data-preserver-spaces=\"true\">. Industrial spaces are also showing signs of weakening.<\/span><span data-preserver-spaces=\"true\">\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">The only potential bright spot in CRE is the\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/retail-investing-is-making-its-return\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">retail sector<\/span><\/a><span data-preserver-spaces=\"true\">, as robust consumer spending and suburban migration has driven demand for outdoor shopping centers.\u00a0<\/span><\/p>\n<div class=\"justify-center \" x-data=\"{ IabAdad_block_: popAd(['r720x90'], '1') }\" :class=\"IabAdad_block_.linkURL ? 'flex pt-8' : 'hidden'\">\n<a x-show=\"https:\/\/www.biggerpockets.com\/blog\/IabAdad_block_.linkURL\" x-on:click=\"adClicked('https:\/\/www.biggerpockets.com\/blog\/2-trillion-in-commercial-debt-is-set-to-come-due', IabAdad_block_.sponsor, IabAdad_block_.title, IabAdad_block_.id, 'blockAdClicked', 'blockAd', 'postContent')\" target=\"_blank\" x-init=\"&#10;      analytics.track('blockAdLoaded', {&#10;        referrer: 'https:\/\/www.biggerpockets.com\/blog\/2-trillion-in-commercial-debt-is-set-to-come-due',&#10;        sponsor: IabAdad_block_.sponsor,&#10;        ad_title: IabAdad_block_.title,&#10;        ad_page_location: 'postContent'&#10;      })&#10;    \" x-intersect:enter.once=\"adViewed('https:\/\/www.biggerpockets.com\/blog\/2-trillion-in-commercial-debt-is-set-to-come-due', IabAdad_block_.sponsor, IabAdad_block_.title, IabAdad_block_.id, 'blockAdViewed', 'blockAd', 'postContent')\" rel=\"noopener\"><\/p>\n<div class=\" hidden sm:block\">\n<img class=\"m-0\" :src=\"https:\/\/www.biggerpockets.com\/blog\/IabAdad_block_.r720x90\" :alt=\"IabAdad_block_.r720x90Alt\"\/>\n<\/div>\n<div class=\"block sm:hidden\">\n<img class=\"m-0\" :src=\"https:\/\/www.biggerpockets.com\/blog\/IabAdad_block_.r320x50\" :alt=\"IabAdad_block_.r320x50Alt\"\/>\n<\/div>\n<p><\/a>\n<\/div>\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Interest Rates Aren\u2019t Going Down Fast Enough\u00a0<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">While interest rates have gone down a bit, it might not be enough. According to\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.wsj.com\/real-estate\/commercial\/the-bill-is-coming-due-on-a-record-amount-of-commercial-real-estate-debt-451ec8cb\" target=\"_blank\" rel=\"nofollow noopener\"><em><span data-preserver-spaces=\"true\">The Wall Street Journal<\/span><\/em><\/a><span data-preserver-spaces=\"true\">, many borrowers are refinancing at rates higher than when they first took out loans.<\/span><span data-preserver-spaces=\"true\">\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">The Federal Reserve is under pressure to cut rates, with\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.morningstar.com\/markets\/when-will-fed-start-cutting-interest-rates\" target=\"_blank\" rel=\"nofollow noopener\"><span data-preserver-spaces=\"true\">some economists<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0expecting a cut by the end of the year to 3.75%-4% and continued cuts by the first half of 2026 until the rate hits 1.75%-2%. However, that might not be fast enough for the CRE sector.\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.fitchratings.com\/research\/structured-finance\/us-commercial-real-estate-refinance-challenges-propel-cmbs-delinquencies-refinanceability-to-decline-in-2024-amid-higher-rates-macroeconomic-headwinds-04-01-2024#:~:text=Fitch%20Ratings%20projects%20its%20U.S.,2.25%25%20as%20of%20November%202023.\" target=\"_blank\" rel=\"nofollow noopener\"><span data-preserver-spaces=\"true\">Fitch Ratings<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0expects delinquency rates in commercial real estate to increase to 4.5% this year, while regulators are worried about the spillover effects.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">In its 2023 annual report, the\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/home.treasury.gov\/system\/files\/261\/FSOC2023AnnualReport.pdf\" target=\"_blank\" rel=\"nofollow noopener\"><span data-preserver-spaces=\"true\">Financial Stability Oversight Council<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0(FSOC) cited exposure to commercial real estate as a concern for financial institutions and said that they need to better understand the risk. Nearly 50% of CRE\u2019s outstanding debt is held by banks.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">\u201cAs losses from a CRE loan portfolio accumulate, they can spill over into the broader financial system. Sales of financially distressed properties can\u2026 lead to a broader downward CRE valuation spiral,\u201d FSOC said in its report.\u00a0<\/span><\/p>\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">The Bottom Line for Real Estate Investors<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">Commercial real estate investors should buckle in and get ready for a bumpy ride over the next few years. That said, although the CRE space is under pressure, there\u2019s still some time for landlords to negotiate. Still, with CRE sales also under pressure, that\u2019s devalued properties, making it hard for lenders and borrowers to agree on how much the property should be worth.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">With banks becoming more risk averse around CRE and under more regulatory scrutiny, that could open opportunities for non-bank lenders such as\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/find-private-money-lenders\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">private credit\u00a0<\/span><\/a><span data-preserver-spaces=\"true\">to step in. And for some savvy investors, the stress in the CRE market could provide opportunities.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">In other words, there could be opportunities for investors to find distressed properties for a great value, provided they\u2019re prepared to weather some uncertainty in the next few years. However, uncovering these bargains will require a lot of due diligence to avoid falling for value traps.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Real estate investors should make sure to heavily\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/real-estate-investment-analysis\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">scrutinize<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0every opportunity that presents itself. While there will certainly be some opportunities to revitalize properties, not all cheap properties will be worth the long-term price.<\/span><\/p>\n<div id=\"visibility-group-block_64dd56548a48e\" class=\"visibility-group  hidden\">\n<div id=\"hero-block_62df1a82bfc88\" class=\"first:mt-0 hero-block py-4    has-background has-theme-gold-light-background-color has-text-color has-theme-gold-color\">\n<div class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n<div class=\"relative z-30 w-full \">\n<main class=\"py-4\"><\/p>\n<p class=\"has-theme-gold-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Get the Best Funding<\/p>\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:16px\">Quickly find and compare investor-friendly lenders who specialize in your unique investing strategy. It\u2019s fast, free, and easier than ever!<\/p>\n<p><\/main>\n<\/div>\n<div class=\" first:mt-0 relative h-full lg:flex lg:items-center\">\n<img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  shadow-xl rounded-md hidden lg:block\" src=\"https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/Lender-Match.png\" alt=\"find a lender with lender match\" title=\"$2 Trillion in Commercial Debt is Coming Due\u2014What Does That Mean for the Industry? 4\"\/>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"wp-block-group is-layout-constrained wp-block-group-is-layout-constrained\">\n<div class=\"wp-block-group__inner-container\">\n<div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n<div class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n<div class=\"relative z-30 w-full \">\n<main class=\"py-4\"><\/p>\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n<p><\/main>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<p class=\"italic\"><b>Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n<\/div>\n<p><br \/>\n<br \/><a href=\"https:\/\/www.biggerpockets.com\/blog\/2-trillion-in-commercial-debt-is-set-to-come-due\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In this article Commercial real estate\u00a0has had a few rough years, and it seems like things won\u2019t be getting better anytime soon. The sector is set for a potential rise in defaults, as higher interest rates have increased the costs of refinancing.\u00a0 And with $2.8 trillion due between now and 2028, more landlords could be [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":5111,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[33,1],"tags":[],"_links":{"self":[{"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/posts\/5110"}],"collection":[{"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/comments?post=5110"}],"version-history":[{"count":0,"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/posts\/5110\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/media\/5111"}],"wp:attachment":[{"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/media?parent=5110"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/categories?post=5110"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/tags?post=5110"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}