The commercial real estate industry passed a key milestone in regard to dealing with the “wall of maturities”—and the huge load of potential problem loans that have been hanging over the market for the past three years.
The wave of maturities appears to have moved past its peak. According to the Mortgage Bankers Association (MBA), $875 billion in outstanding commercial loans is set to mature in 2026, a 9 percent dip compared to the $957 billion that was scheduled to mature in 2025. Albeit slight, the decline is a welcome shift from maturities that had been climbing higher over the last few years, and a sign that lenders may be done kicking the can down the road.
Sentiment among both borrowers and lenders also is shifting in a more positive direction. “There are still lots of loan maturities for 2026, but there’s not the same level of concern that we saw in 2024,” says Susan Mello, executive vice president, capital markets at Walker & Dunlop. Although lenders are still cautious, optimism is being fueled by strong liquidity, a more stable interest rate environment, and property values that seem to have found a bottom.
The MBA is forecasting that the 10-year Treasury yield will continue to average around 4.2 percent in 2026. “That stability takes away the volatility on values that comes from the capital markets, and now the focus is really on operating fundamentals and asset quality as the basis for value,” Mello says. And while lenders are still dealing with maturities, they have a better understanding of the assets in their portfolio—where there might be some weakness, where there are improving fundamentals, and where there’s strength, she adds.
Distress Remains Elevated
Maturities will continue to be a big driver of both refi activity and transaction volume in the near term. “The wall is declining from its peak, but it’s still a very large wall, and there remains a substantial amount of debt that needs to be refinanced, restructured, or otherwise resolved,” says Josh Bodin, senior vice president, capital markets strategy & trading at Berkadia.
An important distinction for multifamily, specifically, is that the sector has a deep and functional refinance market that is led by Fannie Mae and Freddie Mac. That liquidity doesn’t eliminate the need to bring more equity to the table, but it does provide a path forward for many borrowers, Bodin notes.
Lenders continue to work through problem loans within their portfolios. The balance of distress in U.S. commercial real estate climbed to $130.3 billion by the end of 2025, reflecting a $14.1 billion increase over the course of the year, according to MSCI. Data also shows that the volume of net new distress being added to the market is slowing, however, while the volume of loan workouts is rising. Last year, $43 billion in distress was worked out, compared to $32.9 billion in 2024.
“We do expect to see an uptick in maturing loan-driven sales and foreclosures this year, as more borrowers have exhausted their extension options for existing loans,” says Clinton Jenkins, director of debt capital markets research at JLL. Notably, the market will need to work through a heavy load of problem office loans. Another trouble spot is weakness in multifamily in markets struggling with oversupply, as well as Class B apartments that were acquired at aggressive cap rates in 2021 and 2022.
However, any distress that occurs will not be caused by a lack of liquidity. “The credit markets are extremely liquid, with all lender groups active,” Jenkins says. Many lenders say that they want to increase loan originations in 2026. In addition, both Fannie Mae and Freddie Mac raised their multifamily loan purchase caps for the coming year to $88 billion each, up from $73 billion last year. The availability of debt from various sources has allowed borrowers to refinance and extend business plans for another two to three years.
CMBS Delinquencies Rise
The lingering pain points are most evident in the CMBS market, where both the delinquency rate and the special servicing rate climbed higher in January, to 7.47 percent and 10.91 percent, respectively, according to Trepp. Increases were led by problem office loans, with the office delinquency rate hitting a new high of 12.34 percent.
CMBS also appears to be nearing a turning point, though. “It looks like 2026 will, hopefully, be the peak, and in 2027 and beyond, the market will start normalizing and working through the troubled loan balances,” says Stephen Buschbom, research director at Trepp.
Yet some sizable and unresolved problems remain that could cause CMBS delinquencies to fluctuate this year, Buschbom adds. For example, the $835 million loan on One New York Plaza was one of the largest loans to become delinquent in January—and a big contributor to the spike in the office delinquency rate. Since then, though, the loan was modified and extended to January 2028.
“Delinquencies may continue to rise a little bit in CMBS in 2026, but that comes with the territory,” says Michael Riccio, co-head of national production, capital markets debt & equity finance and head of lender relations at CBRE. “I don’t think delinquencies are a huge issue for the broader market.” CMBS tends to finance deals that can’t get done anywhere else, because of very large loan size, weaker borrower credit, or leasing risk at a property, among other reasons. According to the MBA, delinquencies for banks and thrifts have been hovering around 1.5 percent, and below 1 percent for life insurance companies and government-sponsored enterprises.
Although maturities are elevated, some underlying market factors are contributing to the outsized volume. For example, some maturities are not rolling off, simply because they have built-in extension options. Additionally, lending activity has shifted more toward short-term debt in recent years. Borrowers are opting for more five-year debt, which means the “wall of maturities” could be more the norm due to the prevalence of shorter-term loans.
Troubled Loans Beyond Office
Office has been at the center of distress, and that story will continue to play out during 2026. “Some of the weaker-performing office loans will go the liquidation route and foreclosure. We also have this wide band of ‘no man’s land,’ where the borrower can’t refinance, but there’s still the possibility of some recovery of their equity,” Buschbom says.
Buschbom expects those borrowers to try to renegotiate modifications that won’t require them to put an excessive amount of equity back into the deal. The hope is that they can buy more time until improvement in the Class A office trickles down to help struggling Class B properties.
Although office accounts for nearly half of the current balance of outstanding distressed loans, at $62.9 billion, pockets of distress endure across all property sectors. Apartment loans are a distant second with $24.1 billion in distress, followed by retail at $23.4 billion, according to MSCI.
The stress in multifamily loans is concentrated in short-term bridge loans—particularly loans on newer developments that were underwritten with aggressive rent growth and lease-up assumptions. “Multifamily isn’t immune from the maturity wall, but it’s uniquely positioned to work through it,” Bodin says. “Liquidity is deep, investor demand is strong, and while fundamentals are a little bit soft today, capital is clearly looking through that to a more balanced environment.”
Many multifamily loans are being worked out through refinancing, extensions, capital infusions, or recaps. However, lenders’ willingness to “extend and pretend” is losing momentum, even in multifamily, Bodin notes. “Lenders increasingly want resolution, either through payoff, refinance, or asset sale, so that they can recycle their capital,” he says.
Let’s Make a Deal
Industry participants that have been predicting a slow unwinding of problem loans are now seeing that progress come to pass. The ability to refinance or modify a loan is highly dependent on the situation and whether a viable path forward exists.
“We see some borrowers that are willing to put some equity in to right-size a loan, whether that’s a refinance with an existing lender or a new lender, where they have faith in their asset and so . . . are putting in some new equity,” Mello says. Borrowers also are finding that the amount of equity needed to refinance is a lot less than it would have been a year or two ago, she says.
Some borrowers are working to hold on to assets because they do see a recovery, and the competition in the market from lenders is resulting in spread compression that is helping to lower the cost of capital. “As that metric goes into their budgeting and their NOI calculation, it makes it easier for some borrowers to remain committed to an asset,” Mello adds.
A common view in the industry these days is that lenders are going to stop being conciliatory and providing extensions, and they’re going to call these loans. “I’m not sure that’s true,” Riccio says. “The lenders that I’ve spoken to have said, ‘we don’t really want to take the deals back.’” If the sponsor is willing to work with their lender, and there’s a reasonable business plan for a property, lenders are going to continue to work with borrowers.
Extensions and loan modifications have made things difficult for those investment groups that have raised capital in hopes of capitalizing on distress. The buying opportunities and discounts are not as deep as some had hoped. Investors are finding deals at below replacement cost prices, though, and those deals are likely to continue as borrowers run out of road on extensions.
“The maturities that everyone’s talking about, to me, represent opportunity,” Riccio says. “We actually think it’s a very good time in the cycle to buy, because of the attractive entry points to purchase.”