Recent reports and articles have discussed upcoming commercial real estate debt maturities, with the main focus on the office sector. A white paper released by CommercialEdge indicated that “conditions are ripe for a spike in commercial mortgage delinquencies” due to rising interest rates, lender cut backs and weaker property fundamentals. The percentage of CMBS loans in special servicing closed out April 2023 at 5.6%, down from 10.5% during the pandemic but twice as high as pre-pandemic levels of 2.7%.
The white paper also noted that 15.6% of office properties nationwide will reach maturity by 2025 while 13.5% industrial property loans will also mature between 2023 and 2025 across all markets within U..S Yardi Matrix Director of U .S Research Paul Fiorilla commented “Every property type has maturing loans” adding “One of the main points is that defaults are much different among property types, and future distress will vary depending on sector fundamentals.” He further explained weak demand coupled with high vacancies make distress more likely for offices whereas strong demand keeps it low for industrial properties; however this varies geographically too – Atlanta & Chicago rank amongst top five markets having highest number maturing industrial & office loan respectively while Los Angeles ranks amongst top US market where significant percentage (20%)of its office loan reaches maturity by 2025 followed closely behind Columbus OH having 24 % stock subject to maturing loan till same period
Fiorella put any concerns about current scenario being comparable to Great Financial Crisis wave defaults & delinquencies rest saying healthy demands exist currently for apartments ,industrial& self storage alongwith banks not lending aggressively like 2005-2007 cycle when acquisitions were financed 90+ leverage& optimistic rent growth assumptions
