LOS ANGELES – Nearly 20 per cent of outstanding debt on United States commercial and multi-family real estate – US$929 billion (S$1.25 trillion) – will mature in 2024, requiring refinancing or property sales.

The volume of loans coming due swelled 40 per cent from an earlier estimate by the Mortgage Bankers Association (MBA) of US$659 billion, a surge attributed to loan extensions and other delays rather than new transactions.

With the Federal Reserve signalling that it is done hiking interest rates, it is likely more deals will get done in 2024, according to Mr Jamie Woodwell, head of commercial real estate research at the bankers group.

“Volatility and uncertainty around interest rates, a lack of clarity on property values and questions about some property fundamentals have suppressed sales and financing transactions,” Mr Woodwell said on Feb 12.

“This year’s maturities, coupled with greater clarity in those and other areas, should begin to break the logjam in the markets.”

About US$4.7 trillion of debt from all sources is backed by US commercial real estate, ratcheting up concern among regulators and investors as building values slide.

Increasing defaults and write-downs have hit lenders such as New York Community Bancorp, KKR & Co’s commercial mortgage real estate investment trust and holders of commercial mortgage-backed securities (CMBS).

An estimated US$85.8 billion of debt on commercial property was considered distressed at the end of 2023, MSCI Real Assets reported, citing an additional US$234.6 billion of potential distress.

Commercial property prices are down 21 per cent from a peak reached in early 2022, before the Federal Reserve launched its aggressive rate hikes to combat inflation, January data from Green Street show.

Office prices have had the biggest decline, falling 35 per cent, according to the real estate analytics firm.

Banks have US$441 billion of commercial property debt coming due in 2024, the mortgage bankers group reported.

About US$234 billion of maturing debt is securitised in CMBS, collateralised loan obligations and asset-backed securities, while US$168 billion in loans are coming due for non-bank lenders, such as debt funds.

About 25 per cent of office loans are coming due in 2024, the MBA said. Values have plummeted and vacancies have soared with the growth of remote and hybrid work. BLOOMBERG