Your building may be performing. Your tenants may be paying. Your equity may appear secure. But when your commercial loan matures, the numbers can tell a very different story.
For years, commercial real estate owners benefited from relatively inexpensive financing, favorable lending conditions, and appreciating property values.
Many acquired or refinanced properties during a period when interest rates were substantially lower and lenders were competing aggressively for quality real estate.
Today, that landscape has changed.
As loans approach maturity, some owners are discovering that refinancing isn’t simply a matter of renewing an existing mortgage. It can require additional equity, restructuring debt, accepting different loan terms, or making difficult decisions about whether to continue holding an asset.
The greatest risk isn’t necessarily a poorly performing building. It’s entering a refinancing negotiation without understanding what the property can support under today’s lending conditions.
A $875 Billion Reality Check
According to the Mortgage Bankers Association, approximately $875 billion in commercial and multifamily mortgage balances were scheduled to mature in 2026, representing 17% of the $5 trillion in outstanding commercial mortgages covered by its survey.
An additional $652 billion was scheduled to mature in 2027.
Although scheduled maturities have declined from their previous peak, these figures represent significant refinancing activity across the commercial real estate industry.
The challenge is not that every maturing loan will encounter distress. Many well-capitalized owners with strong properties will successfully refinance.
The challenge is that today’s lenders may evaluate those same buildings under a substantially different set of assumptions.
Why Refinancing Has Become More Complicated
Consider an investor who purchased a multifamily property several years ago with an attractive fixed-rate loan.
The building has maintained occupancy, rents have remained relatively stable, and the owner has consistently met the property’s operating obligations.
From an ownership perspective, the investment may appear healthy.
However, when the original loan matures, the lender must reassess the investment based on current financial conditions.
That review may include:
- Current interest rates and available loan products.
- Net operating income and debt service coverage.
- Updated property valuations and loan-to-value requirements.
- Tenant quality, occupancy, and lease expirations.
- Deferred maintenance and anticipated capital expenditures.
- Available cash reserves and borrower financial strength.
Even if the property remains profitable, the amount a lender is willing to refinance may be significantly lower than the existing loan balance.
That difference can become an unexpected equity requirement for the owner.
The Math: When a Good Building Develops a Financing Problem
Consider a hypothetical commercial property with an outstanding mortgage of $3 million.
The owner currently has a 4% interest-only loan, producing annual interest payments of approximately $120,000.
Now assume that the loan matures and the available refinancing option carries a 7% interest rate.
On the same $3 million principal balance, annual interest-only payments would increase to approximately $210,000.
That represents an additional $90,000 annually in financing costs, before principal amortization, lender fees, or other transaction expenses.
And there is another consideration.
The lender may no longer be willing to refinance the entire $3 million balance.
If a new appraisal, underwriting standards, or debt service requirements support only a $2.5 million loan, the property owner could be required to contribute approximately $500,000 to retire the existing debt, excluding refinancing costs.
The building hasn’t necessarily failed.
The financing environment has changed.
This illustration is hypothetical and assumes interest-only financing for comparability. Actual refinancing terms and underwriting results will vary.
The Hidden Danger: Waiting Too Long
One of the most consequential mistakes an owner can make is postponing a refinancing strategy until the loan is nearing maturity.
By that point, the owner’s options may be substantially limited.
Lenders can require time for appraisals, environmental assessments, underwriting, credit approval, and documentation.
If complications arise, an owner may face additional pressure to accept unfavorable financing terms or negotiate an extension from a weakened position.
A more proactive approach begins well before the maturity date.
For many commercial assets, initiating a strategic financing review 12 to 18 months before maturity can provide valuable time to evaluate alternatives.
This is not simply a lending conversation.
It is an ownership strategy conversation.
Refinancing Isn’t Always the Best Answer
Property owners frequently approach loan maturity with one primary objective: secure another loan and continue holding the property.
But refinancing should not automatically be treated as the preferred outcome.
Depending on current property performance, equity position, market conditions, and long-term objectives, several alternatives may deserve consideration.
1. Refinance and retain ownership.
For stabilized assets with sufficient income and favorable debt coverage, refinancing may remain an appropriate strategy.
2. Negotiate an extension or modification.
Certain lenders may consider extending the maturity date, modifying loan terms, or restructuring existing obligations. Availability depends on the loan documents, lender policies, and borrower circumstances.
3. Introduce additional capital.
An equity partner, recapitalization, or capital contribution could provide the liquidity required to support continued ownership.
4. Sell before maturity.
In some situations, a strategically timed disposition may offer an owner greater flexibility than waiting until a financing deadline creates urgency.
5. Reposition the asset.
Operational improvements, lease restructuring, capital investment, or improved expense management may strengthen a property’s financial profile and long-term value.
Each alternative carries different financial, tax, and investment implications.
The appropriate decision must be based on the property, the capital structure, and the owner’s objectives.
What This Means for Los Angeles Commercial Property Owners
Los Angeles presents a particularly complex investment landscape.
Multifamily properties, industrial facilities, retail buildings, and office assets each face different leasing fundamentals, operating challenges, and financing considerations.
A well-located industrial building with stable tenancy may present a very different refinancing opportunity than an older office asset facing vacancy and near-term capital requirements.
Similarly, multifamily owners must evaluate how insurance expenses, repairs, local regulatory requirements, and other operating costs influence net operating income and lender underwriting.
The broader market environment matters, but property-level fundamentals ultimately drive financing decisions.
Owners should understand not only what their property could sell for today, but also what the existing income stream can realistically support under current lending standards.
That distinction can determine whether refinancing remains practical, or whether another strategy could produce a better financial outcome.
The Three Questions Every Owner Should Be Asking
Before the next loan maturity, commercial property owners should have clear answers to three essential questions:
What is my property worth in today’s market?
Not what it was worth at acquisition. Not what a neighboring owner believes their building is worth. An assessment grounded in current income, market sales, buyer expectations, and property conditions.
How much financing can the property realistically support?
Understanding current debt coverage requirements, valuation assumptions, and lender expectations helps identify potential funding gaps before they become urgent.
Would I be better positioned refinancing, recapitalizing, or selling?
The answer may depend on equity preservation, tax exposure, liquidity needs, reinvestment opportunities, and long-term investment objectives.
These questions should be addressed together, not independently.
The Bottom Line: Protect Your Equity Before the Deadline
A commercial loan maturity should never come as a surprise.
Yet for some owners, the consequences of maturity become clear only when refinancing terms are presented.
By then, negotiating leverage may have diminished.
Successful commercial real estate ownership requires more than purchasing the right asset and managing it effectively. It requires understanding how changing capital markets influence property values, financing opportunities, and exit strategies.
The best time to evaluate your options is when you still have them.
At One West Group, our commercial real estate advisory approach focuses on helping property owners, investors, and developers make informed decisions regarding asset valuation, investment strategy, acquisitions, and dispositions.
For owners approaching a loan maturity, an independent assessment of current property value and potential disposition alternatives can provide an important foundation for the broader financing conversation.
Is your commercial loan coming due in the next 12 to 24 months?
Before making your next move, understand what your property is worth, how current market conditions could affect your options, and whether holding or selling best aligns with your investment objectives.
One West Group | eXp Commercial
Investment Advisory | Capital | Brokerage
Market commentary dated October 10, 2026. This article is provided for general information and does not constitute lending, legal, tax, or investment advice. Property owners should consult qualified lenders and professional advisers regarding their individual circumstances.