Maturing Apartment Loans Could Overtake Office for Troubled Debt

An estimated $332 billion in potentially troubled commercial real estate debt is scheduled to mature this year, approximately one-quarter of a total of $1.3 trillion potentially troubled debt coming due between now and 2033, Newmark reported. Although loans tied to office properties comprise more than half the 2024 tally at $184 billion, the apartment sector accounts for nearly a third of the total at $106 billion. 

Moreover, the gap between potentially troubled office maturities and those tied to multifamily loans will shrink in the years to come. In fact, from 2028 through 2033 the apartment sector will contribute a larger share of potentially troubled maturities than office, although the dollar volumes of pending maturities in each sector will be smaller compared to this year’s. All told, Newmark reports that $542 billion of office maturities through 2033 are potentially troubled, compared to $550 billion in multifamily. 

Ranked against either office or apartments, retail runs a distant third when it comes to potentially troubled maturing loans, with industrial an even more distant fourth. “The high office volume results from most loans being underwater,” according to Newmark’s latest United States Multifamily Capital Markets Report. “The distribution of LTV ratios for multifamily [is] more favorable overall, but the greater size of the multifamily market and the concentration of lending during the recent liquidity bubble drive nominal exposure.”