The $875 Billion Ticking Time Bomb in Commercial Real Estate

$875 billion of commercial real estate debt is scheduled to mature this year in 2026. And while that number is actually down about 9% from 2025 figures, the fact that annual maturities are still running at nearly triple the 20-year historical average means that the pressure is still on for commercial real estate borrowers. And the main reason why these numbers are so big is what real estate investors have referred to as extend and pretend with many borrowers and lenders extending loan terms beyond their initial maturity date. So, in this video, we'll break down how we got here, which property types are most at risk today, and the impact this wall of maturities could have on the industry over the next few years.

So, according to a recent survey released by the Mortgage Bankers Association, roughly 17% of all outstanding commercial mortgage debt in the US, or about $875 billion of loans, are scheduled to mature in 2026. And while this usually wouldn't be a problem in a more stable interest rate environment, with the huge rise in interest rates we saw in 2022 and 2023, a lot of commercial real estate borrowers that bought properties just three to five years ago cannot afford to refinance at today's market rates. Now, the way the industry dealt with this problem in 2024 and 2025 was primarily through what investors referred to as extend and pretend with lenders and borrowers pushing out loan maturities and modifying loan terms in the hopes that rates would eventually come down and make that more affordable. But today, in 2026, rates still haven't fallen enough to make a material positive impact for borrowers, which has put many property owners with maturing commercial real estate loans in a really tough spot. According to a January 2026 report from Morningstar DBRS, more than 50% of the roughly $100 billion of securitized commercial mortgages coming due this year are considered unlikely to be paid off at loan maturity, with this number up from just 20% in 2023 and 25% in 2024 and 2025. And as of February this year, there were close to $25 billion in CMBS loans that were already past their maturity date without a formal extension in place, which matches levels we haven't seen in this industry in almost 20 years. Even the chief economist of the Mortgage Bankers Association acknowledged this at their 2026 Commercial Multifamily Finance Convention, saying that in 2025, even though interest rates hadn't dropped to levels investors were hoping for by now, lenders were quote "no longer simply extending loan terms. " And when lenders

aren't willing to continue to work with borrowers, this is when distress can really start to pick up. And especially for certain commercial real estate product types, this could be a very volatile next few months. According to Trepp data, the CMBS office delinquency rate hit a record 12. 3% in January of this year, which was the highest rate we've seen since Trepp started tracking this metric back in the year 2000. And according to CoStar data, over 83% of all office CMBS loans that matured before 2026 and are still outstanding are currently delinquent with over 92% of these loans requiring special servicing. The multifamily and retail sectors are also seeing distress right now with both retail and multifamily CMBS delinquencies rising to 7% in January of 2026, which pushed the overall delinquency rate for CMBS loans to almost 7. 5% for all commercial property types. Now, the industrial asset class is the exception to the rule here with less than 1% of industrial CMBS loans being delinquent in January, but with so much of the industry having issues with repayment right now and lenders starting to be a lot less willing to continue extending loan terms, this could lead to a lot of commercial real estate distress sooner rather than later. Now, if these

trends continue and these loans aren't extended, there are a few different things we could see a lot more of throughout the rest of this year. And the first is an uptick in refinance activity where the outstanding balances of these maturing loans would be replaced by new loan proceeds at today's market rates. However, given the drop in valuations we've seen over the last three years, refinance proceeds won't be able to cover the outstanding loan balances on a lot of commercial real estate deals. And even if they could, given where rates are today in 2026, a lot of borrowers couldn't even afford debt service payments on a higher loan amount. There's also a chance we could see an uptick in investment sales activity this year with borrowers hoping that sale proceeds would be enough to pay off existing loan balances. However, again, with commercial property values down by over 4% since the start of 2023, according to the RCA CPPI report from January, in a lot of cases, this may also result in investor equity being either partly or even fully wiped out. And in some worst-case scenarios where borrowers can't reasonably pay debt service on a new loan and sale proceeds wouldn't even come close to covering the outstanding loan balance, we may also see an uptick in foreclosures on commercial properties as lenders lose their patience and decide they need to move on. Now, with all of these things

being very realistic possibilities in 2026 and 2027, the question from here becomes what will this mean for investors and people looking to break into this industry over the next few years. And the first thing I think is very likely to happen is that while there's been a lot of talk about opportunities to buy distressed deals over the last few years, this might actually be the window when some commercial properties start to become heavily discounted. And when you factor in that many of these distressed deals today actually have strong operating fundamentals, but are just over-leveraged, this could lead some really attractive buys at well below replacement cost. And if transaction activity spikes, this is good news not only for companies that generate revenue this way, but also for people looking to land jobs in this industry since additional revenue means more money that can be used to hire new talent and go after these deals. This is especially true for acquisitions and investment sales roles that have been really hard to come by over the last few years with many companies either freezing hiring or reducing their headcounts entirely while they waited for transaction activity to start to pick back up. And with all the frenzy around AI growth right now causing public equity valuations to reach levels we haven't seen since the dot-com bust, many investors may also start to rotate out of higher-risk assets and into more stable investment vehicles like commercial real estate. And when capital flows into this sector, investment activity also tends to pick back up, which could be a big net benefit to commercial real estate after years of very slow growth. Ultimately, it looks like we could see some big changes to this industry over the next few years, especially in the office, retail, and multifamily sectors. And if you're looking to get started in commercial real estate today, this may be one of the best times in years to try to break in. And if you are looking to land a job in this business and you want to make sure you have the technical skills you'll need to land interviews and pass an Excel modeling exam that might be given to you when interviewing for jobs at commercial real estate investment, development, brokerage, or lending firms, make sure to check out our all-in-one membership training platform, Breaking into CRE Academy. A membership to the academy will give you instant access to over 120 hours of video training on real estate financial modeling and analysis. You'll get access to hundreds of practice Excel interview exam questions, sample acquisition case studies, and you'll also get access to the Breaking into CRE Analyst Certification Exam, which covers topics like real estate acquisition and development modeling, commercial real estate lease modeling, equity waterfall modeling, and many other real estate financial analysis concepts that will help you prove to employers that you have what it takes to tackle the responsibilities of an analyst or associate at a top real estate firm. And if you liked this video and want to see more content on the channel on current market events, make sure to hit the like button and let me know. And if you are watching this and working in the industry right now, let me know in the comments what you're seeing from lenders in today's market environment. As always, thanks so much for watching, guys. I hope you found this helpful. Subscribe to the channel if you haven't already to see more videos like this every single week, and I'll see you in the next video.