According to MSCI Real Assets, over half of the $400 billion in commercial real estate loans due to mature in 2023 are still outstanding. This, combined with an additional $500 billion set to mature in each of the next two years, means that a total of over $1.2 trillion will need to be refinanced during a challenging capital markets environment.
The Federal Reserve’s projection for another interest rate hike before year-end also adds pressure for borrowers as they may face higher rates and longer periods of elevated rates than initially anticipated.
CMBS accounts for more than half (40%) of the loans maturing in 2023, followed by CLO (5%) and investor-driven lenders (9%). However, these exposures shift going into next year with CMBS falling to only 18% while CLO and investor-driven lenders increase their shares.
Bank lenders are the second largest source for loans maturing in H2 2023 at 34%, followed by office assets serving as collateral for over one-fifth (20%) of these maturities. The majority share is held by CMBS and bank lenders carry most exposure towards office maturities.
For those looking to refinance long-term debt amid rising interest rates, there may be some cushion provided by cumulative price growth since origination but it could prove difficult given tighter credit conditions despite federal regulatory agencies’ call on working with creditworthy borrowers facing financial challenges.
In addition,CRED iQ reports that maturity defaults have significantly increased across all CRE loan types due largely impart from rising interest rates. Over half (52%) occurred this year alone among all maturity defaults on outstanding loans while specially serviced loan default percentage reached nearly one-third(32.3%).
Among those transferred this year alone ($16 billion),the maturity default rate rose above forty-four percent(44.1%),an increase exceeding one-third accordingto CRED iQ.Forty-onebillion dollars of loans are currently with special servicers.
