Will the annual volume of US commercial Real Estate (CRE) loan defaults exceed 1.5% of the total outstanding loan volume in 2027?

CRE Loan Defaults: Exceeding 1.5% in 2027

The US Commercial Real Estate (CRE) market faces a significant challenge due to expiring low-interest loans, high current interest rates, and ongoing distress in the office and retail sectors. This prediction states that the annual volume of US commercial real estate loan defaults will exceed 1.5% of the total outstanding loan volume in 2027.

The Refinancing Wall

The high 'Yes' vote is due to the anticipated 'refinancing wall'—the massive volume of loans originated during the low-rate era (2015-2022) that will mature between 2025 and 2027. Many of these properties:

• **Valuation Drop:** Have seen their valuations drop (especially office space).
• **Debt Service Increase:** Cannot afford the dramatically higher debt service required at current interest rates.
• **No Buyer:** Cannot be sold because the market value is lower than the debt owed.

This confluence of factors suggests a wave of defaults, with 1.5% being a severe but plausible outcome in the year of peak refinancing stress.