Commercial property premiums fell 5.5% in the first quarter while liability climbed and Maryland...
More than $100 billion in CMBS loans mature in the next nine months, and nearly half of Los Angeles suburban office loan balance has its largest tenant leaving before the loan does. Both calendars were set years ago. Neither shows up in this year’s numbers.
TL;DR
- CRED iQ counts more than 2,600 CMBS loans, over $100 billion in balance, maturing between September 1, 2026 and June 30, 2027. The headline distress rate across that pool is a mild-looking 5.55%.
- That average hides the real problem. Loans in the pool carry an average note rate of 5.44%. Loans originated this May through August priced at 6.58%. For office specifically the reset is 5.14% to 6.86%, a gap of 172 basis points that applies whether or not a loan is troubled today.
- CRED iQ calls this shadow distress: a perfectly healthy loan walking into a materially higher payment on a date everyone already knows.
- The lease side has the same shape. Trepp’s Los Angeles analysis, reported by CRE Daily, found suburban office healthier than urban towers on every current measure, and yet $1.6 billion of a $3.5 billion suburban book, about 46%, sits on properties where the largest tenant’s lease expires before the loan matures.
- Both calendars are knowable years ahead. The budget is the only document where they meet, and most budgets model neither.
- An expiration changes four things at once: rental revenue, the reimbursement setup, the occupancy your gross-ups assume, and the capital to re-tenant. Most models update the first and inherit the other three.
A quick glossary
- Special servicing. When a securitized loan runs into trouble, it moves from the routine servicer to a special servicer with authority to negotiate, modify or foreclose. A rising special servicing rate is the clearest public signal that a pool of loans is under stress, which is why it appears throughout the data below.
- Note rate and origination rate. The note rate is what an existing loan actually pays. The origination rate is what comparable new debt costs today. The whole argument here lives in the gap between them, because that gap is what a borrower absorbs at refinancing regardless of how the property is performing.
- Base year and expense stop. Two ways of setting the point above which a tenant starts paying its share of operating expenses. A base year fixes it at a given year’s actual costs; an expense stop fixes it at a stated dollar amount. Resetting either at renewal changes what is billable, and it is the single most commonly missed consequence of a renewal.
- Controllable expenses and caps. Costs the landlord can reasonably influence, typically excluding taxes, insurance, utilities and snow removal. Leases often cap how fast the controllable portion can grow. How that cap compounds, and whether it resets with the base year, decides how much of a real increase is actually recoverable.
Two calendars, both already written
Almost everything in a CRE budget is a forecast. Insurance renewals surprise you. Tax reassessments surprise you. Utility costs move with weather and rate cases nobody controls.
Two things are different. Your loans have maturity dates. Your leases have expiration dates. Both were fixed on the day the documents were signed, often years ago, and neither is a forecast at all. They are appointments.
This month two separate pieces of research landed on the same point from opposite ends of the capital stack, and read together they say something neither says alone.
The debt calendar: what happens when a healthy loan reprices
CRED iQ’s August 21 analysis counts more than 2,600 CMBS loans, carrying over $100 billion, maturing between September 1, 2026 and June 30, 2027. The balance-weighted distress rate across that pool is 5.55%, which sounds survivable.
The interesting number is not the distress rate. It is the repricing. Loans in that maturing pool carry an average note rate of 5.44%. Loans actually originated between May and August of this year priced at a loan-weighted 6.58%. That is roughly 114 basis points of difference between the debt that exists and the debt available to replace it.
It is not evenly spread:
Note that the widest resets are not where today’s distress is. Mixed-use and retail are two of the cleaner performers on trailing distress and face the two biggest jumps. Hotel carries the highest current rate and faces the smallest gap, because that debt was already priced near today’s market.
CRED iQ’s own phrase for this is the useful one: shadow distress. A loan with nothing wrong with it today still walks into a materially higher payment the moment it refinances, on a date already on the calendar.
The concentration is worth noting too. Ten of 371 metro areas account for 57.8% of the balance, and New York-Newark-Jersey City alone is $15.87 billion, 18.1% of the national total. A national average is doing a lot of work it should not be trusted to do.
The lease calendar: the same shape, one floor down
Now the other end. Trepp’s August 2026 analysis of Los Angeles office CMBS, reported by CRE Daily, splits that market cleanly. Urban towers carry $7.8 billion across 73 properties, with median occupancy at 83% and 19.7% of loans in special servicing. Suburban properties carry $3.5 billion across 111 properties, with median occupancy at 93% and only 6.2% in special servicing.
On every present-tense measure, the suburbs are fine.
The forward measure is not. Within that suburban book, $1.6 billion involves properties where the largest tenant’s lease expires before the loan matures, roughly 46% of the balance. Most of it, about $1.3 billion, sits in buildings where that tenant occupies under half the rentable space. But $236 million sits in buildings where the largest tenant averages 89% of the building.
That is shadow distress again, wearing different clothes. A building at 93% occupancy has nothing wrong with it today. It has an appointment.
Where the two calendars meet
Here is the part neither piece of research says, because neither is written for the person who has to build the budget.
These two calendars land on the same document. A property whose loan matures in the window and whose anchor tenant rolls in the same period is not facing two independent risks. It is facing one compound event, and the order matters: the tenant decision drives the cash flow, the cash flow drives the coverage ratio, and the coverage ratio drives what refinancing terms are even available.
Model those separately and you will get the arithmetic right and the story wrong. A renewal at a lower rate might be fine on its own and fatal in the quarter a loan reprices 172 basis points higher.
The budget is the only place in the organization where those two calendars are visible at the same time. That is not a reporting nicety. It is the reason budget season exists.
What an expiration actually changes
An expiration is not one line moving. It is four, and they move together.
Rental revenue, which everyone models
The lease rolls, and either a renewal rate or a market rate with downtime replaces it. This part gets attention because it is what the deal conversation is about.
The reimbursement setup, which usually gets inherited
This is the expensive one. Renewals frequently change the terms governing what the tenant pays toward operating expenses: a fresh base year, a new expense stop, a renegotiated cap on controllables, a change in what is excluded. Those terms get far less attention than rent in the negotiation, and they are the part most budget models carry forward untouched.
The occupancy your gross-ups assume
Gross-up adjustments extend variable expenses toward a standard, typically as if the building were 95% occupied. The wording matters: occupied, not leased. A building dropping from 93% to 78% because one anchor left does not only lose that tenant’s contribution. It changes the gross-up math for every remaining tenant in the pool, including those whose leases never moved.
The capital to re-tenant
Tenant improvements and leasing commissions arrive in the year you re-lease, not the year you budgeted the rent. Where that work is recoverable under other leases, some of it may be amortizable into the recovery pool, which is a separate decision with its own rules and its own way of going wrong.
Most models handle the first well and inherit the other three.
The renewal that drops its reimbursements
When a tenant renews, the base rent gets all the attention. The improvement allowance gets modeled. The commission gets modeled. The reimbursement terms are the part nobody argued loudly about, so they are the part nobody re-enters.
A renewed suite running on its old recovery setup can underbill all budget year and surface only at reconciliation the following spring, as a true-up invoice landing on a tenant who was never warned, or as money a cap now makes uncollectible.
There is a sharper version of the same error. Kathy Lim, a CRE veteran of 30 years, put it plainly in a BOMA Power Hour session on reconciliation best practices:
“I’ve seen people carry this cap amount from when they signed the original lease even though they might have base year resets in future years. That’s wrong. You’re losing money for the landlord on that basis. Because when you reset the base year, you’re saying your rent covers the expenses for that year. And as such, your controllable caps get reset from that year as well.”
The mechanics compound it. Under a non-cumulative cap, the ceiling grows over the lesser of prior-year actual controllables or the prior-year cap, so it ratchets down over time. A cap carried from a 2019 signing through a 2026 renewal with a base year reset can sit well below where the renewed lease says it should. Every dollar of that gap is recovery the owner is entitled to and never bills.
Concentration is not the risk. Not knowing is.
It would be easy to read the Trepp numbers as an argument against concentrated tenancy, and that reading is too simple. Trepp’s own data undercuts it: Warner Bros occupies 56% of one property, Second Century, on a lease running more than a decade past the loan’s maturity. Heavy concentration, low risk, and lenders price it accordingly.
Concentration is not the variable. Remaining term against your own planning horizon is. One tenant in 90% of a building on a fifteen-year lease is a stable asset. Four tenants at 20% each, all expiring inside eighteen months, is a cliff that no occupancy number reveals until it arrives.
The useful exercise is not “how concentrated am I.” It is “what does my rent roll look like laid out by expiration date, and where do those dates fall against my loan maturities.”
Five things to check before your 2027 budget is locked
- Put both calendars on one page. Lease expirations and loan maturities, next 36 months. Overlaps are the first thing to look at, not the last.
- For every lease expiring inside the budget year, write down the assumption: renew at what rate, or vacate with how much downtime. An unwritten assumption is one nobody can argue with later.
- For every renewal already signed, open the recovery setup next to the new lease abstract. Reimbursement method, base year, cap, exclusions, gross-up treatment. Five minutes per lease, once a year.
- Find the base year resets and reset the controllable caps that go with them.
- If a loan matures in the window, model debt service at replacement cost rather than the current note rate. For office in this pool that difference is 172 basis points.
The reframe
The headline version of both reports is that more trouble is coming. Maybe. The operational version is more useful: the two most predictable dates in commercial real estate, when your leases end and when your loans come due, are also the two least likely to be modeled together.
Nothing here requires forecasting skill. The dates are known. What is required is that the rent roll, the expense side and the recovery setups stay connected, so changing one lease updates everything downstream of it instead of leaving the rest stale.
Kardin has spent 30 years on that problem. Kardin Portal is a purpose-built budgeting engine that works alongside your accounting system rather than replacing it, where lease start and end dates drive the recovery terms, so an expiration raises the reimbursement question rather than burying it. Portfolio reporting includes a Cash Flow Analysis with debt service coverage, which is a useful thing to have when both calendars land in the same year.
If your 2027 budget is being built this month, it is worth seeing what that looks like on your own rent roll. Request a walkthrough and we will use your leases, not a demo file.
Budget with clarity.
Sources
- CRED iQ, “The Maturity Wall Is Getting Taller,” Liam Mulcahy, August 21, 2026. More than 2,600 conduit and SBLL CMBS loans, over $100 billion, maturing September 1, 2026 through June 30, 2027; balance-weighted distress 5.55%; office 9.4% on $23.86 billion; average note rate 5.44% against new originations at 6.58%; the full property-type reset table; ten of 371 metros at 57.8% of balance, New York-Newark-Jersey City $15.87 billion.
- CRE Daily, “Urban LA Office Faces Stress While Suburbs Eye Lease Risk,” August 25, 2026, reporting Trepp data. Urban LA office $7.8 billion across 73 properties, 83% median occupancy, 19.7% special servicing; suburban $3.5 billion across 111 properties, 93% and 6.2%; $1.6 billion with the largest tenant’s lease expiring before loan maturity; Warner Bros at 56% of Second Century.
- Kathy Lim, BOMA Power Hour on CAM reconciliation best practices, recorded April 2024, on base year resets and controllable caps.
