Insights into CMBS Loan Modifications and Trends in Commercial Real Estate Financing

The commercial real estate financing world is experiencing a significant shift as CMBS loan modifications continue to rise. With $131.3 billion in outstanding CMBS loans set to mature in 2024 and $321.4 billion through 2027, the trend of loan modifications is on the rise.

In 2023, the phrase “extend and pretend” became popular as property owners struggled to refinance loans due to higher interest rates and tighter underwriting standards. This led to a surge in loan modifications, with volumes reaching nearly $4 trillion by the third quarter of 2023.

Office CMBS loans have been at the forefront of these modifications, accounting for 42% of all loan modifications in 2023, followed by retail at $2.6 billion. Conduit loans have also played a significant role, making up 35% of all new CMBS modifications.

Some notable examples of recently modified loans include the $1.2 billion 555 California Street Campus loan, which was extended for one year, and the $975 million IMC Portfolio loan, which was extended to June 2026 after facing imminent maturity default.

With delinquency rates on the rise, the trend of CMBS loan modifications is expected to continue upwards. As the market evolves, it will be crucial to monitor these trends and their impact on the commercial real estate industry.