Large-scale lender forbearance – including loan extensions – over the past two years has made it difficult to estimate the size of the current debt-funding gap. Nevertheless, this chart provides an estimate of the debt-funding shortfall for office loans originated from 2017 to 2023 and coming due between 2025 and 2028.

Our December 2022 debt-funding analysis noted a substantial gap between outstanding debt backing office properties and the new financing available when current loans mature. Our analysis was updated in June 2023 and October 2023 to reflect shifts in cap rates and property value forecasts.

Large-scale lender forbearance – including loan extensions – over the past two years has made it difficult to estimate the size of the current debt-funding gap. Nevertheless, the chart below provides an estimate of the debt-funding shortfall for office loans originated from 2017 to 2023 and coming due between 2025 and 2028, using the following methodology:

Using these assumptions, we estimate a $131 billion funding shortfall over the next four years. This represents nearly a quarter of all office debt originated between 2017 and 2023. Distress remains a supreme challenge in the office sector, particularly for undifferentiated Class B and C properties, as reflected in the 11% CMBS delinquency rate. We expect to see more distressed assets come on the market as lenders grow weary of extending delinquent loans. 

 

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