When the going gets tough in CRE, the smart get their loans modified. At least those that have loan maturities facing them.

There have been many recent signs of problems in CRE loans and statuses. No one in the industry knows what will happen and there is significant opacity in current conditions, particularly given low transaction rates. 

Trepp released a research note about a rise of loan extensions in 2023, increasing because of rising uncertainty and high interest rates. For example, a borrower hasn't paid off the balance on a 2013 fixed-rate office loan. Refinancing would require a higher monthly interest rate. If they don't refinance, then the borrower returns the keys to the lender, which then most likely sells the property at a loss. This is why loan modifications are becoming important in CRE, because they "have come in handy for the parties that don't wish to see the above scenario play out," Trepp wrote.