Majority of 2023 CRE Maturities Have Yet to Occur

More than half of the nearly $400 billion in commercial real estate loans due to mature in 2023 remain outstanding, says MSCI Real Assets. Combined with the nearly $500 billion set to mature in each of the next two years, “more than $1.2 trillion in commercial mortgages will be coming due in a challenging capital markets environment,” the MSCI Real Assets team writes in the latest U.S. Capital Trends report.  

Further, says MSCI Real Assets, “With the Federal Reserve projecting an additional rate hike before year-end, borrowers must take on board that the higher-for-longer interest rate environment may be even higher, for even longer than originally anticipated.” 

More than half of the loans set to mature in the latter half of 2023 are tied to CMBS, with 40% of the total; CLO (5%) and investor-driven lenders (9%). Going into next year, though, these exposures shift. Maturing loans tied to CMBS fall to 18% of the total in 2024, while the shares of CLO and investor-driven lenders increase to 6% and 19%, respectively.  

Originations by the latter two groups peaked in 2021 and remained elevated in 2022. Accordingly, MSCI Real Assets says, the shorter-term nature of their lending has resulted in an increased share of loans coming due in the two to three years since they were originated.  

In second place behind CMBS, bank lenders are the next largest single source of loans maturing in the second half of 2023. Bank lenders of all sizes account for 34% of loans coming due before year-end.  

Looking at the schedule of maturities by property type, office assets serve as collateral for more than 20% of loans maturing in H2 2023, a share that remains stable through 2027. CMBS and bank lenders carry the largest exposures to outstanding 2023 office maturities, with nearly three-quarters of the total. Although banks lag CMBS in total maturities for H2 2023, these lenders carry the largest exposure to maturing office loans.  

“For borrowers looking to refinance long-term debt, cumulative price growth between the loan origination date and the current period may provide a bit of cushion against higher capital costs and tighter credit conditions,” MSCI Real Assets reports. “Still, despite federal regulatory agencies calling for lenders to work with creditworthy borrowers who may be facing a period of financial challenges, for some commercial property owners, the path to refinance may prove difficult.” 

Separately, CRED iQ reports that the impact of rising interest rates has significantly impacted the performance of CRE loans across the board and maturity defaults are on the rise. Fifty-two percent of all maturity defaults on outstanding loans occurred this year, says CRED iQ.  

The maturity default percentage of all specially serviced loans amounted to 32.3% as of September. Among loans that transferred to special servicing in 2023, the maturity default rate increased to 44.1%, an increase of more than one-third. 

Forty-one billion dollars of loans are actively with the special servicer, of which $16 billion transferred this year alone, CRED iQ says.