Delinquency on CMBS loans for office buildings across the country remained fairly steady during Q2, but rising interest rates could spell trouble for maturing loans.

There are billions of dollars worth of CMBS loans due to mature in the next 18 months, according to a new report from Colliers. Approximately $33.2B will be due across nine U.S. metro areas before the end of 2023.

Manhattan holds the lion’s share of debt, with a total of $15.6B due to mature within that time frame. Older office towers are struggling to sign new leases, as remote work and the flight to quality has caused vacancy to spike to near-record highs and created obstacles for owners looking for new debt.

The cities with the next most office CMBS debt coming due are Chicago, Los Angeles and Washington, D.C., with $4.2B, $3.8B and $3B due, respectively.

CMBS delinquency rates have trended downward overall since the beginning of 2022, according to Colliers. However, Trepp numbers published early this year showed delinquency rates reaching their highest point in January 2022 since June 2020. As many as 7.89% of CMBS loans were marked as “troubled” in February this year by Moody’s Analytics.

Borrowers able to obtain loan extensions will likely take them, Colliers predicted. Just this week, Vornado secured $3.2B in refinancing deals, the vast majority of which came in the form of loan extensions.

Office loans slated to mature within the next three years could face high debt service coverage ratios, according to a Trepp analysis cited by Colliers.

Some owners may also seek to hand the keys to buildings over to lenders, or sell off office properties at a loss. Investors in 34 distressed properties across the country lost a cumulative $263M in May alone, according to data from CRED iQ.

Offices may not be the lone asset class thrown into turmoil amid inflation, interest rate hikes and economic uncertainty. Commercial property prices showed an overall decline of 3.7% in June, according to Green Street, while its all-property index is down 4.9% from its March prices.

Multifamily rents, while still high, are also showing signs of cooling off. Year-over-year rent growth was down to a 9.2% increase in Q2, compared to the 11.4% increase recorded in Q1, according to data from CoStar. Vacancy rates are also up 5% nationally, CoStar found, although demand for housing and rent growth remains high in the Sun Belt’s popular pandemic relocation cities.