Maturing Class A Office CMBS Loans Need New Equity in 75% of Cases

Three-quarters of maturing Class A office loans in commercial mortgage-backed securities (CMBS) would require borrowers to add equity to refinance at prevailing rates, signaling a sizable funding gap.

The comparable figure for Class B and C office loans is 61%. The percentages apply to maturing office loans held in CMBS and show how often borrowers would need to put in additional equity under current borrowing conditions. They describe a refinancing shortfall, not an expected loss rate.

Office loans make up $22.2 billion of the $61.1 billion in private-label CMBS loans scheduled to reach hard maturity in 2027. The $22.2 billion is the office portion of that maturing loan balance; it does not represent the full U.S. commercial property debt market.

A hard maturity arrives when a loan has no contractual extension options left. Borrowers then must repay or refinance the loan, sell the property or negotiate a modification. The 2027 figure marks when those obligations come due, not how borrowers will resolve them.

CMBS are securities backed by one commercial mortgage or a pool of commercial mortgage loans. The equity estimates describe a financing hurdle ahead of maturity. They do not forecast that the loans will default.

A separate measure showed the overall CMBS delinquency rate rising 17 basis points to 8.02% in September, its highest level since November 2020. Five large single-asset, single-borrower loans accounted for much of the increase.

The delinquency rate and refinancing estimates measure different conditions: one tracks delinquencies across CMBS, while the other estimates the equity needed to refinance maturing office loans. The September figure therefore does not show how many of the loans scheduled to mature in 2027 will become delinquent.