A quarter of the $18.4B in outstanding loan volume linked to Denver office properties is scheduled to mature next year, with the $4.7B total expected to nearly double to $8.3B by 2026, according to new data from CommercialEdge.

With depressed demand for office space in Denver and correspondingly elevated vacancy rates, the coming wave of maturities is likely to increase pressure on landlords to refinance or sell their properties.

Challenges posed by high interest rates and a reset for the office market are compounded by dynamics like construction costs as these maturities loom, the CommercialEdge report says.

“As tenant improvements and other costs increase, owners find it increasingly difficult to maintain net income,” the report says. “Consequently, office delinquency rates are rising and are likely to get worse as the growing number of underwater loans mature.”

In the third quarter, downtown Denver’s office vacancy increased to a record-high 30% while construction activity and net absorption cratered, according to CBRE. Certain properties downtown have managed to remain healthier than others, particularly new, high-end offices on the northern end of downtown Denver.

And some submarkets, like Cherry Creek, have seen greater interest in office properties as companies continue their search for balance in the world of hybrid work. But overall, Denver’s office market, like so many others across the country, has struggled in the pandemic’s wake.

Overall, CommercialEdge reviewed 80,000 properties and found more than $150B of office mortgages will mature in 2024 and a total of $300B of mortgages will mature by 2026.

Most of the buildings were Class-A properties in large, urban markets like Manhattan and Los Angeles. Urban markets accounted for about $176.9B, or 58.8%, of the total loans that will mature by 2026, according to the report. But it also suggests that the combination of “weaker demand, rising costs and lower property values” is squeezing office owners in nearly every market.

“The potential for default involves not just volume but the performance of the market and individual properties,” the report says. “Defaults are more likely to occur in markets that are overbuilt and/or have seen demand crushed as a result of the pandemic.”