Loan modifications — often called extend-and-pretend strategies for growingly obvious reasons — have become an ongoing factor in commercial real estate.
At the same time, reliance on the tactic has spiked remarkably, according to a new analysis by CRED iQ. An examination of the “evolving landscape” of modifications on CMBS, SBLL, CRE CLO, and Freddie Mac loans, comparing activity both recent and across a three-year window, shows an enormous jump in the use of kicking the financial can down the road.
CRED iQ’s data shows that loan modifications climbed from $21.1 billion in March 2024 to $39.3 billion in March 2025. That was a jump of $18.2 billion, or 86.3%. Last month alone saw $2 billion in modifications across 47 loans. It was the largest surge since May 2024.
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The modifications aren’t necessarily representative. The loan types for which CRED iQ has data don’t include commercial bank CRE loans, a large part of total lending. The modifications have varied widely in size, from a low of $11.3 million on two properties in July 2022 to $2.4 billion on 632 properties in July 2023. But they represent available and important data.
This growing maturity wave, fueled by extended loans from 2024, underscores the shifting dynamics within the sector. While some experts had hoped for relief through Federal Reserve rate cuts, that looks increasingly unlikely, leaving borrowers grappling with refinancing pressures and elevated debt service costs. Banks don’t want bad loans on their balance sheets, so modifications have become more important.
CRED iQ offers Willis Tower in Chicago’s West Loop. The 3.8 million square foot tower was backed by a $1.33 billion interest-only loan that was supposed to mature in March 2022. There were five one-year extension options. A March 2025 modification pushed the maturity date out by three years to March 2028. The occupancy rate is 83.1% and the debt service coverage ratio is 1.32, so it seems to perform well.
What does all this mean, particularly without being able to look ahead to rate cuts that might help the refinancing process and lower the outstanding maturities? CRED iQ thinks that the modifications point to a “broader shift in CRE financing.”
“The CRE sector is at a crossroads, with nearly $40 billion in modified loans signaling both caution and adaptability,” the firm wrote. The implications for investors (asset valuations and portfolio strategies) and lenders (needed adjustments to balance risk and opportunity) are yet to be understood.
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