"Numbers Don't Pencil": Commercial Real Estate Facing Widespread Refinancing Crisis, Says Industry Veteran

Written by:

Steve Marcinuk

Date:

28 Jul 2025

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A wave of commercial property refinancing challenges is looming as higher interest rates collide with loans made during the zero-rate era, according to Joel Miller, Managing Partner at Wall Street Capital Partners and a host of Mornings with Joel: Commercial Real Estate Podcast.

“That’s what we’re finding with a lot of commercial real estate right now – property is upside down because of interest rates,” Miller says. “They may have financed them at a four, and now rates are at six, and you can’t, the numbers don’t pencil.”

The Zero-Rate Hangover

Miller points to the extended period of near-zero interest rates as setting up current market challenges. “We had so many years of close to zero interest rates,” he explains. “When the GDP is great, and everybody’s making money, it’s a good time to buy.”

However, this created a ticking time bomb in commercial real estate financing. “Most of these loans have a five to seven year window,” Miller notes. “If you look back at right after the financial crisis, and look at where we are now, they come and do.”

Limited Options for Owners

Property owners facing maturity on these loans now have few attractive options, according to Miller. “You got to either sell that property, or you have to find some equity investor to put money in,” he explains. “And in a market like this, a lot of equity investors are a little hesitant to put money out.”

This hesitancy from equity investors creates additional pressure on an already strained market. Miller suggests many properties that might have been attractive investments under previous interest rate conditions now face serious viability questions.

Compounding Market Pressures

The refinancing challenge isn’t occurring in isolation, Miller points out. “You got that, coupled with the issues with office space, because of people not really coming back to work because of COVID,” he says. “Then you have retail… it’s been beat up pretty bad because of online retail.”

These multiple pressure points create what Miller sees as significant systemic risk. “There’s a lot of issues out here that can really impact the market,” he warns. “I don’t want to be all doom and gloom, but it’s just the facts.”

Emerging Opportunities

While the situation creates serious challenges for current property owners, Miller suggests it may generate opportunities for well-positioned investors. His firm looks for situations where properties become distressed due to financing issues rather than fundamental problems.

“We’re not trying to kick people out of their deals,” Miller explains, “but if it’s something that they can’t get done and they’re going to lose it, we’ll try to find a way to keep them in it, and maybe take it over from that perspective.”

Looking Forward

Miller expects these refinancing challenges to continue creating market disruption as more loans reach maturity in the coming years. The situation may lead to significant property value adjustments and ownership changes across commercial real estate sectors.

For now, Miller’s firm is carefully evaluating opportunities while remaining mindful of current market risks. “Everybody can make money when the market is going up,” he notes. “But how do you deal with situations when things are not as rosy?”