U.S. CRE Debt: Why The Funding Gap May Be Larger Than We Think
Apr 2, 2024
Over the course of 2024, the commercial & multifamily mortgage sector is expected to face a significant increase in debt maturities.
EXECUTIVE SUMMARY
- Commercial and multifamily loans due rises to $929 billion, up 28% from 2023.
- A funding gap of almost $150 billion emerges amid tightening lending policies.
- Sector-specific nuances add another $10 billion to the funding gap.
- Banks and CMBS hold 75% and are constrained by market and regulatory pressures.
- Constraints on traditional lenders drive a shift toward alternative financing sources.
EXHIBIT 1: SPIKE IN 2024 COMMERCIAL & MULTI-FAMILY LOAN MATURITIES
Over the course of 2024, the commercial and multifamily mortgage sector is expected to face a significant increase in debt maturities, with figures set to reach $929 billion (Exhibit 1). This marks a substantial 28% rise from the $729 billion that matured in 2023, and accounts for 20% of the $4.7 trillion in outstanding debt, according to data from the Mortgage Bankers Association1.
This spike, originally estimated at $658.6 billion, has been revised upward due to deferred loan repayments. The bulk of this increase is in loans held by banks and commercial mortgage-backed securities (CMBS), both of which continue to wrestle with constraints on new lending. Banks, holding nearly half (48%) of loans due in 2024, now face $440.7 billion in maturities, reflecting a 35% rise from previous estimates. Similarly, loans in CMBS, which account for 25%, now amount to $234 billion, a marked increase from earlier projections.
By property type, loans against multifamily assets continue to dominate as the single largest sector, comprising 28% of maturing loans in 2024, consistent with previous estimates. Meanwhile the office sector, which comprises 22% of this year’s volume, has seen the largest uptick from earlier estimates as it adapts to changing work patterns, rising to $206 billion. Loans associated with sectors categorized as “other,” which encompasses healthcare, hotels, and unspecified types, have also been revised up to $283.6 billion and now account for 30% of loans due in 2024 (Exhibit 2).
EXHIBIT 2: LOAN MATURITIES COMPOSITION (%) & 5-YEAR PROJECTIONS (US$ BILLIONS)
1Dollar figures reported are unpaid principal balances as of December 31, 2023. As most loans pay down principal, the balances at the time of maturity are expected to be lower than those reported.
The views expressed herein are those of PGIM Real Estate investment professionals at the time the comments were made and may not be reflective of their current opinions and are subject to change without notice. Neither the information contained herein nor any opinion expressed shall be construed to constitute an offer to sell or a solicitation to buy any security.
Certain information in this commentary has been obtained from sources believed to be reliable as of the date presented; however, we cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. The manager has no obligation to update any or all such information, nor do we make any express or implied warranties or representations as to the completeness or accuracy. Any projections or forecasts presented herein are subject to change without notice. Actual data will vary and may not be reflected here. Projections and forecasts are subject to high levels of uncertainty.
Accordingly, any projections or forecasts should be viewed as merely representative of a broad range of possible outcomes. Projections or forecasts are estimated, based on assumptions, subject to significant revision, and may change materially as economic and market conditions change. This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation. Clients seeking information regarding their particular investment needs should contact their financial professional. Investment products are distributed by Prudential Investment Management Services LLC, member FINRA and SIPC.
PGIM Investments is a registered investment advisor and investment manager to all PGIM U.S. open-end investment companies. PGIM Quantitative Solutions, Jennison Associates, and PGIM are registered investment advisors and Prudential Financial companies. PGIM Quantitative Solutions is the primary business name of PGIM Quantitative Solutions LLC, a wholly owned subsidiary of PGIM. PGIM Fixed Income and PGIM Real Estate are units of PGIM.
© 2025 Prudential Financial, Inc. and its related entities. PGIM Custom Harvest, Jennison Associates, Jennison, PGIM Real Estate, PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
For compliance use only 1078967-00001-00