Big Maturity Wall in 2025? Wait Until You See the $5.5T Through 2028

Days ago, JLL released its estimate of the coming CRE maturity wall — $1.5 trillion by the end of 2025, with a quarter of the total likely finding difficulty in refinancing.

The basics have faced the industry for years. Now the specifics of reality are arriving. Many property owners, and their lenders, have some hard things to face. Will there be enough capital infusion available to enable refinancing or payment of the amounts owed?

However, the future doesn’t stop in 2025. It keeps going and so does the one maturity wave after another. S&P Global Capital IQ made its own projections. The firm expects $946 billion to come to maturity in 2024 and another $998 billion in 2025. That total of more than $1.9 trillion is larger than the JLL $1.5 trillion estimate.

More concerning, though, is that S&P Global didn’t stop with 2025. It continued with an anticipation of $1.148 trillion in 2026, $1.257 trillion in 2027, and $1.138 trillion in 2028.

S&P Global acquired the data from CoreLogic, which aggregated it from 3.6 million CRE property mortgages from tax filings for 75% of U.S. counties. About 60% of the mortgages were missing a maturity date. S&P Global further explained that they used a random forest regression model to estimate the missing maturity dates. Because the model doesn’t generate the same numbers each time, they ran it five times and averaged the results. Then the firm used a separate model for the 25% of counties for which there wasn’t raw data. The totals were “relatively minimal” compared to the 75%.

The firm noted that The Mortgage Bankers Association has estimates that are “broadly consistent.”

This $5.487 trillion total is a much larger problem than whatever the maturity amount for the end of 2025. By their measure, on average the maturing mortgage rates were 4.3%, and the new average interest rate in 2024 has been 6.2%.

Loan defaults would hurt the lenders, of course, but also add downward pressure on property valuations.

The results might be a little deceiving because lenders might extend maturities into the future to avoid defaults. Bank regulators would likely allow this to avoid a domino effect across the banking industry.

“Extensions could provide borrowers some cover in the short-term as well as give lenders time to work out troubled credits and selectively prune their CRE portfolios through strategic sales in the secondary market,” the firm wrote. “But some borrowers could need rates to move notably lower for refinancing to be viable.”

Interest rate cuts by the Fed could provide some belief to the industry, but only some. It’s unlikely that rates will drop to their previous lows.