The Debt Maturity Wave: A Market Reckoning or Opportunity in Disguise?

2025 is a defining year for commercial real estate. The lending environment is changing. Easy money is gone. Debt is coming due. According to S&P Global Market Intelligence, an estimated $1 trillion in multifamily debt is expected to mature this year, much of it financed during the pandemic-era borrowing spree. For well-capitalized buyers, this is the moment to move—and for many owners, it’s a Hail Mary.

 

Most of these loans were written at rock-bottom interest rates, and now 14% are overleveraged, with loan balances exceeding property values—a dangerous setup for owners heading into refinancing. Market dynamics are shifting rapidly as the impending surge in financial maturity sets to reshape ownership and reset pricing, setting the stage for the next multifamily cycle.

 

How Did We Get Here?

The current debt landscape did not happen overnight; it is the result of emergency action taken in the early days of the pandemic. Due to the COVID-19 shutdowns, the GDP shrank by 31.4% (annualized) in the second quarter of 2020, according to the Bureau of Economic Analysis.

 

An unprecedented mix of government and central bank action intervened, saving the economy from a steep collapse. The Federal Reserve slashed interest rates down to next to nothing and purchased hundreds of billions of dollars in Treasury bonds and mortgagebacked securities, a policy known as Quantitative Easing.

 

With the passage of the CARES Act, the Federal Government flooded the system with cash, offering $2.2 trillion in relief funds to Americans nationwide. These efforts revived the f inancial market, and the GDP rebounded by 33.1% within the next quarter, creating the era of ‘free money.’

 

Between 2020 and 2021, the market saw the cheapest cost of capital in modern history. Overpaying on high-priced properties made sense. After all, debt costs were low, and values were only rising, so investors built strategies that only worked in a low-rate environment.

 

Such favorable market conditions only existed because of a crisis. In hindsight, it is easy to see how the flood of cheap capital distorted risk. In 2021 alone, multifamily deal volume surged to over $335 billion, hitting a record-breaking year fueled by sub-four% interest rates and ultra-loose lending, according to Real Capital Analytics.

 

At the time, buyers convinced themselves the market was stable. But how stable can it really be when it is propped up by emergency measures? Now, as those pandemic-era deals come due, the actual level of risk exposes itself.

 

Facing Maturity Pressure

Annual U.S. inflation (CPI) peaked at 9.1% in June 2022—the highest since 1981, according to the U.S. Bureau of Labor Statistics a result, the Federal Government skyrocketed interest rates to stay afloat, essentially creating an economic frenzy.

 

Now, owners are facing the harsh realities of over-optimism as they struggle to refinance. Cap rates are expanding, reducing asset values by 10-30% and, in certain instances, even more. Interest rates jumped from around 3% to 6-7% between 2021 and 2024. Debt service costs have doubled or even tripled in some cases.

 

New data comparing 2025 and 2026 maturities shows just how vulnerable property owners have become. Nearly a third of these loans are already on lenders’ watchlists. Compared to 2026 debt holders, those facing loan maturity this year are worse off, as they relied on more variable-rate debt, interest-only LTVs, and floating-rate loans.

 

Navigating Refinancing Headwinds

Even stabilized, well-oiled properties are feeling the refinancing aftershocks, not because they are not successful, but because the capital stack was designed for one world, and now it is operating in another. And lenders are not willing to take the risk.

 

It comes down to borrowing costs, with interest rates nearly doubling since 2021 and a limited influx of funds. Multifamily loan originations fell 41% in just one quarter, according to MBA’s Q1 2025 Index of Commercial/Multifamily Mortgage Bankers Originations. Banks have stricter DSCR loan criteria, giving themselves a larger buffer, ranging from around 1.30x to 1.40x. S&P Global estimates that a 300-bps rise in rates would require a 25% increase in rent across the board to break even and preserve a DSCR of 1.0x.

 

A Capital Reshuffle

In today’s market, banks are stepping down, and lending composition is evolving. MBA’s Q1 2025 index reports bank originations fell 39% as they account for almost half of the loans maturing from 2025 to 2027. As regulatory scrutiny intensifies and balance sheets tighten, alternative capital sources are moving in. Life insurance companies, agency lenders, and private debt funds are adopting stricter, more selective criteria.

 

Revolving around conservative capital, life insurance companies typically target institutional-quality assets with long-term, low-leverage leases. Agency lenders, such as Fannie Mae and Freddie Mac, are the cornerstones of the multifamily sector but face constraints from affordability mandates and origination caps. Meanwhile, private debt funds are chasing risks that banks could not, funding transitional or distressed assets at a high price tag.

 

Strike While the Iron’s Hot

In the midst of an economic discombobulation, REITs, private equity firms, and institutional investors are quietly lining up, ready to make their move. In 2024, institutional capital re-entered the market in force. According to transaction data, institutional buyers increased their share of acquisitions to 26%, up from 18.6% in 2023, reflecting a strategic pivot toward sectors such as industrial and large-scale multifamily. But it is not just about capital anymore. It is about being selective, creative, and flexible in a motivated seller market.

 

A Window of Opportunity

Recovering from the chaos of crashing deal flow and rising interest rates, sellers are slowly becoming less resistant as the math becomes clearer. CoStar’s Q1 2024 repeat-sales index shows office values plunging about 34% and multifamily prices dropping about 22% from their free money era peaks. The market now has room to breathe as it finds its footing. Key players have no choice but to accept and adapt to a new reality.

 

This moment will not last forever. As capital slowly returns to the market, 2025 could be the inflection point where buyers gain the upper hand before the next wave of institutional capital floods back in.