A vacant commercial real estate sign stands along 55th Street in Boulder, Colorado, on Friday, Feb. 2, 2024. (Matthew Jonas/Staff Photographer)
John Gittelson | Bloomberg
About 20% of the outstanding U.S. commercial and multifamily real estate debt, or $929 billion, will mature this year, necessitating refinancing or property sales.
The total amount of loans coming due increased 40% from the $659 billion the Mortgage Bankers Association initially estimated, but the surge was due to loan extensions and other delays rather than new business.
With the Federal Reserve signaling an end to interest rate hikes, more deals are likely to close this year, said Jamie Woodwell, head of commercial real estate research at Banking Group.
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“Volatility and uncertainty around interest rates, uncertainty about property values and questions about some of the real estate fundamentals have restrained sales and lending activity,” Woodwell said in a statement on Monday. “This year's maturities, combined with a clearer outlook for these and other areas, should begin to break the impasse in the market.”
U.S. commercial real estate backs about $4.7 trillion in debt from all sources, raising concerns among regulators and investors as building values fall. Rising defaults and impairments are hurting lenders such as New York Community Bancorp, KKR & Co.’s commercial mortgage real estate investment trust and holders of commercial mortgage-backed securities.
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MSCI Real Assets reported that an estimated $85.8 billion of commercial real estate debt is considered non-performing at the end of 2023, with an additional $234.6 billion in potential non-performing loans.
Commercial real estate prices are down 21% from their peak in early 2022, before the Federal Reserve began aggressively raising interest rates to fight inflation, according to January data from Green Street. Office prices have fallen the most, dropping 35%, according to real estate analytics firm Green Street.
Banks have $441 billion in commercial real estate debt coming due this year, according to a report by the Mortgage Bankers Association. About $234 billion of that debt is securitized into CMBS, collateralized loan obligations and asset-backed securities, while $168 billion in loans from nonbank lenders such as debt funds is coming due.
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About 25% of office loans are due in 2024, according to the MBA. Values have plummeted and vacancies have soared as remote and hybrid work has increased.