During the late 2010s and early 2020s, low-interest-rate mortgages and short-term loans were rampant. However, the Federal Reserve’s rapid increases in the Effective Federal Fund Rate in 2022 and 2023 sparked fear that refinancing these loans would be difficult once they matured. This has led to several years of gloom-and-doom prophecies about the “wall of debt” or “wall of maturities” and the resulting commercial real estate distress.
With the calendar flipping to a new year, the “wall of debt maturities” prediction is back once again, as are the fearful connotations. However, experts told Connect CRE that the problem has been somewhat overstated.
“Approximately $539 billion of CRE debt will mature in 2026, compared to a 20-year average of roughly $350 billion,” said Steve Buchwald, Institutional Property Advisors’ Senior Managing Director, Capital Markets. Yes, the debt amount is elevated. On the other hand, “this is meaningfully lower than the nearly $957 billion that matured in 2025,” Buchwald pointed out.
As such, while the “maturity wall” exists, “it’s starting to look like the so-called ‘retail apocalypse,” commented Ralph Rader, director of debt placement with Greysteel. “That ended up being a managed threat, rather than a sudden crash.”
Distress: The REAL Story
So, the “wall” is real. But does it mean a plethora of distressed commercial real estate? The simple answer is yes . . . but not necessarily a plethora.
On the one hand, increasing distress is a thing. Colliers’ Senior National Director of Research Steig Seaward explained that distress is gaining momentum across asset classes, with office remaining the most affected, “facing persistent vacancy pressure and refinancing challenges.”
Buchwald agreed, noting that CRE distress is estimated at approximately 11.6% “with the office sector driving much of the increase and distress rates roughly five percentage points higher than other property types.”
But . . .
The current distress and its resulting foreclosures and givebacks aren’t anywhere near the level experienced in the aftermath of the Great Financial Crisis (GFC).
“Distress is rising, but it’s been more of a steady grind than a spike,” said Robert Durand, KBS’s Executive Vice President of Finance. Katherine Bissett with Cox, Castle & Nicholson took it one step further. While rising distress likely won’t be an issue in 2026, “there are still a number of troubled assets that need to work their way through the system in some form or fashion,” said Bissett, who is a partner with the firm.
Furthermore, the current distress is very different from the GFC’s troubled real estate asset issues, which included underperforming assets. According to David Pittman, head of capital markets with Bonaventure, “what we have seen is more ‘distressed seller’ situations than ‘distressed properties’.”
Rader added that in many cases of distress, the underlying assets are performing well. When it comes to the capital stack, not so much. “Owners and investors just need more time, or a fresh layer of equity to heal the wounds left by short-term bridge debt and operational headwinds,” he observed.
Durand agreed, explaining that stress tends to take place among assets in which the capital stack doesn’t pencil anymore. “These situations usually need a reset or repositioning, and there’s no getting around some level of pain,” he added.
Finally, lenders that aren’t interested in commercial real estate ownership are working consistently with borrowers, allowing modifications, extensions and restructurings. The result is a maturity wall that is pushed out to the future and “true distress limited at the asset level,” Pittman said. Added Fidelity Bancorp Funding CEO David Frosh: “So far, kicking the can down the road has helped.”
Breaking Through the “Wall”
So yes, the wall is real. But the experts point out that lenders and borrowers continue to engage in various methods to kick the maturity issue down the road. According to Durand, workouts, extensions and restructurings will remain dominant strategies in 2026.
Buchwald agreed, adding that there’s plenty of capital to support those efforts. Furthermore, “we’re also seeing more creative solutions—lenders restructuring the loan into a performing tranche and a future upside tranche, while allowing new equity to enter in the middle with a priority return ahead of the upside tranche,” he explained.
Frosh also said he believed that recapitalizations and rescue capital will take a larger role in 2026, adding that “this cycle is defined by renegotiation, rather than failure.”
Still, Durand explained that lenders might be less willing to grant repeated short-term extensions in 2026 than they have been in previous years. “The trickiest situations are the in-between assets, those that are still generating income today, but are vulnerable to market shifts and occupancy changes,” he added.
While the current ‘debt wall’ might remain painful, Bissett observed that it has led to a basis reset. As a result, “investors can find a way to make these assets pencil once again,” she said. “This repricing allows disfavored assets, like office, a better opportunity to find capital in 2026.”
Source: “The CRE Debt Wall Looms Once Again: But Don’t Panic“
