The Debtonation Countdown


Will McIntosh
Global Head of Research

John Kirk
Senior Director, Research

Mark Fitzgerald
Senior Director, Research

October 2016

How tight lending conditions are reshaping the CRE landscape

For the better part of a decade, the commercial real estate industry has anticipated the “wall of loan maturities” coming due prior to 2018. With fewer than 18 months until that window closes, a cloud of uncertainty looms over the industry, and nearly $1.4 trillion in loan maturities has yet to be refinanced. The continued ambiguity over the ability to obtain sufficient financing for these loans stems from a slowing global economy, uncertainty about interest rates and increasingly restrictive lending regulations. Although it is difficult to predict exactly how things will play out in the coming months, the countdown to 2018 seems to be gaining momentum.

How did we get here?

It is well documented that transaction volume and lending activity reached record levels in the years leading up to the financial crisis. Many of the loans originated at the time had elevated loan-to-value ratios and pro forma underwriting, consistent with the reckless behavior frequently displayed during that era. Given CRE loans typically have a 10-year refinancing requirement, investors generally have viewed the annual maturities leading up to 2018 as a critical period for the industry.