High debt costs are causing the longstanding debt maturity wall to cast an even longer shadow, new research from Newmark shows. 

Roughly 78% of fixed-rate securitized commercial real estate debt maturing through 2028 carries an interest rate well below the current yield of 10-year U.S. Treasury bonds, a standard benchmark for debt service rates, the brokerage found. 

Most of the loans under scrutiny were underwritten when the cost of debt was near historic lows and valuations were high, and Newmark found that $179B in low-rate debt maturing through 2028 is exposed. 

“This should sound familiar, as the risk of loans maturing into higher rates has been widely discussed since 2023, but two things are different now,” the analysts wrote. “The market largely expects rates to stay elevated, and lenders are moving away from the extend-and-pretend approach that has dominated the past four years.”

Yields on the 10-year Treasury have soared past 5% over the last month and have stayed elevated at levels that analysts have long said would threaten the huge number of commercial real estate borrowers with loans underwritten before the Federal Reserve began raising interest rates in 2023.

Bond traders are reacting to old and new volatility in the macroeconomic space, with the war in Iran broadening to impact another key trade route for the world’s oil and President Donald Trump’s trade war showing little sign of cooling.

Inflation remains elevated, with the consumer price index report this week coming in ahead of expectations and pushing traders to briefly begin shifting bets toward another rate hike at the Fed’s meeting later this month before trading back toward bets on flat rates after Kevin Warsh spoke in Bangkok on Thursday.  

CMBS delinquency rates are climbing, with the overall rate climbing 17 basis points to 8.02% in September, according to Trepp. Retail delinquencies fell sharply in September but increased or were flat across office, industrial, multifamily and lodging loans.

The office sector's 12.16% delinquency rate remains the highest of the core sectors, but multifamily stress is climbing as apartment operators with loans extended from before the pandemic or relying on bridge financing face impending maturity dates and rate resets at significantly higher costs. 

The path forward has become more challenging as markets shift toward a recognition that interest rates are likely to remain elevated, the Newmark analysts wrote. 

“For CRE borrowers, waiting for lower rates is no longer a workable refinancing strategy,” they wrote.