CBRE recently reported a significant funding gap of $72.7 billion for office loans maturing between 2023 and 2025, with no evident gaps for other property sectors at the time. This refers to investors being forced to refinance at a lower loan-to-value ratio or when the property value has decreased since origination.
However, CBRE’s latest report from Econometric Advisors reveals an increase in the office debt funding gap to $82.9 billion and a new $21.7 billion gap for multifamily properties due to added analysis of 2021 vintage loans. This brings the total funding gaps for office and multifamily properties coming due between now and 2026 to $112.8 billion and $44.54 billion respectively.
Accordingly, CBRE Senior Research Data Analyst Michael Leahy explains that “vintage” refers to commercial mortgages issued in specific years such as those originated in 2021 by many multifamily investors using short-term floating-rate debt with low interest rates which is now causing negative effects.
Leahy clarifies that while there have been concerns about CRE loan maturities leading directly into distress, foreclosures or building sales; this is not always true as it depends on factors like declining values or limited credit availability forcing owners into financial strain where they must inject more cash towards their properties failing which defaults occur creating distress situations.
While last summer saw only offices facing these issues before adding multi-family sector this fall; Leahy rules out retail & industrial joining them anytime soon saying “industrial has had enough value gains offsetting credit declines” while retail had less originations than others during ’18-’21 period plus smaller fraction of short-term debts making them relatively safer options compared hereafter.”
