The Fed might be done raising rates. But can the cost of debt drop fast enough to save struggling landlords? Property stocks are up 5.4% since Tuesday’s consumer-price index data showed that U.S. inflation is easing. Commercial real estate has been a big casualty of higher interest rates. Property values have fallen by a fifth since the Fed began hiking in March 2022 and almost 8% of securitized property loans are in distress, according to CRED iQ data, the Wall Street Journal reported. Interest rate cuts can’t come fast enough for landlords who grew addicted to cheap money in recent years. Between now and the end of 2025, $390 billion of securitized commercial real-estate debt matures and needs to be refinanced at higher rates. Another wave of bank debt also comes due. Refinancing has become a real headache, and not just because of interest costs. Falling property values have required owners to inject equity to meet lenders’ loan-to-value thresholds, which have become more conservative. “You can’t get the same leverage and debt is more expensive. So you are getting hit on both sides,” says James Millon, president of U.S. debt and structured finance at CBRE. Landlords are tapping their investors to fill this funding gap, or looking for expensive mezzanine loans.
