A Wave of Commercial Loans Are Coming Due. Some Owners Won't Make It Through.

Written by:

Chris Caggiano

Date:

08 Jul 2026

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Loans originated when interest rates were near zero are now coming due in a very different market. For some owners, refinancing is painful but manageable. For others, the math simply doesn’t work.

When most people think about real estate loans, they picture a thirty-year mortgage on a house. Commercial real estate works differently. Loans on office buildings, apartment complexes, and other income-producing properties typically run five to ten years, after which the remaining balance comes due and the owner must either sell or refinance. For owners who borrowed during the low-rate years of 2020 to 2022, that moment is arriving now, in a market where interest rates are dramatically higher than they were when the loans were written.

For some, the math is painful but workable. For others, the numbers don’t add up: the property doesn’t generate enough income to cover debt payments at the new rate, and in some cases has lost enough value that it won’t support a new loan at all. The result is a wave of commercial property owners facing a reckoning they can’t extend their way out of.

The Loans Are Coming Due

The scale of the problem is significant. According to the Mortgage Bankers Association, commercial and multifamily loan maturities in 2026 total roughly $875 billion. That’s down slightly from $957 billion in 2025, which has led some observers to declare the worst is over. New York real estate attorney and broker Alexander Paykin isn’t so sure.

The more telling number, Paykin says, is what’s happening to loan extensions. In 2024, lenders extended roughly 41 percent of maturing loans rather than forcing resolution. By 2025, that figure had dropped to about 21 percent. The era of kicking the can down the road is winding down. What’s left are loans that can no longer be rolled forward. They have to be dealt with.

Logan Freeman, managing broker at Midwest CRE Advisors in Kansas City, agrees the easy extensions are over, but pushes back on the idea that the market is simply running out of road. What he’s seeing isn’t lenders forcing resolution so much as lenders raising the price of patience. “That’s not ‘extend and pretend,’” he says. “That’s extend and re-underwrite.” Loans are still being extended, but borrowers are being asked to put in more equity and pay higher interest costs to get there. The runway is shorter and more expensive than it was, but it hasn’t disappeared.

Not All Assets Are Equal

The refinancing pressure isn’t hitting all properties equally. The divide running through the commercial real estate market right now is less about property type than about quality, location, and how much debt an owner is carrying relative to what the asset is actually worth.

Paykin sees the split most clearly in New York’s office market. At the top end, well-occupied trophy buildings are refinancing without much difficulty. He points to 9 West 57th Street, a marquee Manhattan office tower that recently secured a $1.8 billion refinancing at favorable terms because it is 90 percent occupied and commanding record rents. A few miles away, the picture looks entirely different. Worldwide Plaza, where a major tenant departure dropped occupancy to 63 percent, saw its valuation fall from $1.7 billion to $345 million, a drop of roughly 80 percent, and its lenders filed a $940 million foreclosure suit. Same city, same asset class, vastly different outcomes.

The pattern holds beyond office buildings. Daniel Kaufman, founder of Kaufman & Company, works with owners across multiple asset classes through his private credit operations. He says the most acute stress is concentrated among owners who were undercapitalized going in and overleveraged on assets without strong cash flow, particularly suburban office properties and some thinner multifamily deals. The borrowers who are managing, he says, are the ones who had equity cushion and stress-tested their assumptions before rates moved. The ones who assumed rates would normalize quickly are now in trouble.

Zach WalkerLieb of Willow Manor Real Estate in Las Vegas sees a similar sorting taking place in his market. Well-positioned industrial and multifamily assets continue to attract capital, while properties with weaker fundamentals are facing the greatest pressure. Strong population growth and business migration have softened some of the impact there, but not enough to insulate every asset from the new lending reality.

What Owners Are Doing About It

Owners facing maturing loans in today’s market have a limited set of options, and most are pursuing one of three paths. 

The first is refinancing and absorbing the higher cost. For owners with strong assets and sufficient equity, this is painful but manageable. The second is selling. When the new debt economics don’t work, some owners are choosing to exit rather than take on more expensive financing. The third is extending, buying time while waiting for conditions to improve. That option, however, is only available to owners whose properties are otherwise performing well enough that lenders are willing to negotiate.

Kristen Croxton, principal at Arcus Harbor Real Estate Capital in Newport Beach, California, says even when a property is performing well, higher rates are translating into significantly higher debt service payments. To manage that, many borrowers are seeking maximum interest-only structures, which reduce monthly costs by deferring principal repayment. But extensions are increasingly coming with strings attached. Lenders are requiring paydowns as a condition, pushing owners toward alternative capital sources to bridge the gap. 

Freeman adds that the owners in serious trouble are a subset, not the whole market: those who overleveraged into rate-sensitive properties and don’t have the equity to bridge the gap. For everyone else, this is a repricing event, not a crisis.

Resolution Season

The commercial real estate market has been bracing for this moment for several years. Now that it has arrived, the picture is less catastrophic than some predicted, but more painful than others hoped.

Freeman puts it plainly. The maturity wall is real, but it is not 2008. Buyers are circling, prices are resetting, and deals are clearing. What’s happening, he says, is a repricing event, not a crisis. The owners in serious trouble are a subset, not the whole market.

Paykin agrees but draws the line more sharply. For quality assets, 2026 is a year of resolution: loans get refinanced, deals get done, and the market moves forward. For everything else, he says, it is something closer to a reckoning. Smaller commercial owners carrying more debt than their properties can support face a narrowing set of options: a workout, a foreclosure, or a discounted sale to a buyer who turns their debt into ownership. “The capital markets are open for quality,” Paykin says. “For everything else, 2026 is resolution season.”

Kaufman frames the divide in terms of discipline. The borrowers who are navigating this environment successfully are the ones who stress-tested their exit assumptions before rates moved. The ones who assumed rates would normalize quickly are now discovering what it costs to have been wrong.

What’s Next

The commercial real estate market is not collapsing. It is sorting. The assets with strong fundamentals, disciplined ownership, and realistic assumptions about where rates were heading are finding their way through. The ones built on cheap debt, optimistic projections, and the assumption that extensions would always be available are running out of room. 

What happens next, in workout negotiations, foreclosure courts, and discounted note sales, will reshape ownership across a significant slice of the American commercial property landscape. That process is already underway.

This article is based on information provided by the expert sources cited above. The views expressed are those of the individual contributors and do not represent a unified industry position. This article is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.