U.S. Office Sector Faces $289B of Loan Maturities

Risk and uncertainty in the U.S. office sector look poised to grow due to increasingly volatile economic conditions compounding the challenges stemming from office loan maturities, which are expected to peak throughout the next few years. Yardi Matrix research data show that 14,000 office properties are encumbered by loans that have recently matured or are due to mature by the end of 2028 with loans totaling $289.2 billion, or 33.5% of total loan volume.

“Nearly 59% of these loans originated before 2021 with the baked-in assumption that high demand would sustain loan obligations through maturity,” according to a report from Yardi Systems’ CommercialCafe. “However, with office-using jobs declining since mid-2023, existing demand being concentrated largely in the highest quality assets and hybrid work putting down persistent roots (among other factors), pressure is building as office loans approach maturity.”

Peter Kolaczynski, director, Yardi Research, said, “The office debt problem is not going away yet. With interest rates and stubbornly low physical occupancy both adding to the headwind, the expectation is for increased delinquencies and distress.”