In the dark days of 2022, when rising interest rates turned commercial real estate into a credit desert, the industry’s perpetual optimists found a rallying cry. Just survive until ’25, they told themselves. By then, inflation would be whipped, money would be cheaper, and demand would again tilt in their favor. But the wished-for salvation was wishful thinking. Borrowing costs remain stubbornly high, and lenders are running low on patience. As the new year approaches, the industry is bracing for the losses it’s been putting off. “I look at 2025 as a year of reckoning,” says Tim Mooney, head of real estate at Värde Partners, which invests in property debt. “Lenders and borrowers will acknowledge that lower interest rates aren’t going to save them.”
US delinquencies spiked in November, according to a Bloomberg analysis of commercial mortgage-backed security data, with more than 10% of loans on office buildings in arrears. Owners are running out of time to shore up funding, and some, like Cannon Hill Capital Partners and Pimco’s Columbia Property Trust, have already given in. The companies recently sold 799 Broadway in Lower Manhattan for $255 million, $15 million less than it needed to pay off its mortgage.
