Banks will be squeezed over the next three years to cut their exposure to commercial real estate as an estimated $2T in CRE debt matures.

Newmark estimates that $929B of that $2T will come due this year alone, the Financial Times reported. If they can't be repaid, those loans will need to hunt for new financing at a time of both increased borrowing costs and lower property values.

Newmark also anticipates that $670B of the loans maturing over the next three years are “potentially troubled," mainly office and multifamily loans.

“Banks will be under pressure” from regulators, Newmark CEO Barry Gosin told FT. Newmark oversaw $50B in loan sales for Signature Bank, which failed in March 2023. Gosin said that banks reducing their exposure would likely achieve that goal in a variety of ways, including reducing their lending to the sector.

The volume of loans maturing in such a short period is in part the result of extensions that borrowers received due to the pandemic, the war in Ukraine and general uncertainty about where interest rates were headed, experts told FT. Those experts also expected conditions to result in a period of elevated levels of loan sales.

An estimated 22 midsized banks have hit a level of CRE loans on their books that puts them in line for greater scrutiny from regulators. Regional banks hold a significant amount of CRE loans and investors are bracing to see what happens as they come due.

“We are at the beginning of the impact of this wall of loans,” Gosin told FT.