U.S. CRE Debt: Why the Funding Gap May be Larger Than We Think
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.
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).
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.
Real Estate Debt
Experienced real estate debt investment manager benefiting from the capabilities of PGIM Real Estate's global equity and debt platform.
Learn more