The evolving landscape of commercial real estate in urban areas.
The commercial real estate sector is on edge as approximately 14,000 office properties face loan maturities by the end of 2027, totaling near $290 billion. High delinquency rates and increased defaults add to the complexity for both borrowers and lenders. Many are seeking loan extensions, but declining market conditions may hinder further assistance. As vacancy rates rise and interest grows in converting office spaces for residential use, the landscape is set for significant shifts in the coming years, especially in key metropolitan areas like Atlanta and Denver.
The commercial real estate sector is bracing for significant challenges as approximately 14,000 office properties are set to have their loans mature by the end of 2027. This accounts for about 33% of all office loans, totaling nearly $290 billion. The looming deadlines create a complex scenario for borrowers and lenders who are grappling with high delinquency rates and increasing defaults.
Data from a recent report suggests a downturn in loans made in 2024, compared to the year before, marking a troubling upward trend in defaults. According to Trepp data, delinquency rates for office commercial mortgage-backed securities (CMBS) reached 11.08% in June 2025, up 3.5% since the previous year. The combination of high delinquency and impending loan maturities forces both borrowers and lenders into tough decisions.
Many have sought loan extensions for temporary financial relief. However, with the ongoing rise in delinquency, lenders may become reluctant to offer further extensions, complicating the situation for many commercial properties across the country.
As the landscape continues to fluctuate, an increase in discounted office properties is expected, driven in part by a growing interest in converting office spaces to residential units as public policies evolve. Vacancy rates in the office sector remain high, contributing to stagnated occupancy levels and slow job growth that directly affect demands in the office market.
Among metropolitan markets, Atlanta stands out with 50.5% of its office loans maturing, representing over $11 billion. Denver follows closely behind, with 49% of its loans reaching maturity, while other major cities including Bridgeport-New Haven, Chicago, and the Twin Cities are also facing significant loan expirations.
The average rent for office space across the nation settled at $32.87 per square foot in June 2025, reflecting a slight dip from May yet showcasing a year-over-year increase of 3.8%. Notably, despite having a stable vacancy rate of 19.4%, this marks a year-over-year rise of 130 basis points.
Manhattan’s office market demonstrated resilience with a vacancy rate of 15.2% as of June, buoyed by demand from the legal and finance sectors. The area saw notable activity, including Amazon leasing or acquiring nearly 1.5 million square feet since the fall of 2024, highlighting a potential recovery of interest in premium office spaces.
During the first half of 2025, office sales reached $23 billion, averaging $189 per square foot, with Atlanta showing a competitive office asset sale price of around $163 per square foot, just shy of the 2019 average.
Office vacancy rates across Western markets show higher levels compared to the national average, with San Francisco at a staggering 27.7% and San Diego at 23%. On the flip side, cities in the Southern U.S. are showcasing mixed developments, with Miami witnessing the highest asking rents at $57 per square foot and a comparatively lower vacancy rate of about 14.3%.
As of June 2025, 41 million square feet of office space were under construction, reflecting a significant low point for new developments following the pandemic’s industry-wide changes to work practices. In particular, San Diego’s life science sector is experiencing concerns of oversupply due to anticipated high vacancies as new lab spaces come online.
The future of the commercial real estate market remains uncertain as it navigates through high vacancy rates, increasing loan maturities, and evolving work preferences post-pandemic. With diverse regional trends and ongoing adjustments, industry players must stay vigilant and proactive amid a shifting landscape.
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