US Regional Banksโ Navigate Commercial Real Estate Challenges as Office Loan Troubles Persist
NEW YORK – US โขregional banks areโ facing ongoing headwinds from the commercial real estate (CRE) sector, particularly with office loans, despite efforts to scale back lending โand offload portfolios. Approximately โ$804 billion of US CRE mortgages are maturing this year,according to S&P โฃGlobal,with โroughly $936 billion set to mature next year โ- an 18.6% increase from 2025. Maturities are projected toโฃ peakโ at $1.1 trillion in 2029, โaccording โto S&P Global Market Intelligence estimates.
The office sector remains a key concern.Moody’s โคAnalytics director โof Economic Research Ermengarde Jabir told Reuters that โฃapproximately one-fifth of allโข maturing commercial real estate loans in 2025 are expected to be office loans. She noted that office properties “have yet to ‘recover’ and are still posting increasing vacancy rates.”
Beyond office space, challenges are emerging in the life sciences real โestate market. Biotech fundingโฃ slowdowns and limited access to public markets are causing companies toโ pause expansion plans, impacting demandโ for lab space. โThe overall lab vacancy rate across the topโฃ 13 life sciences markets roseโ toโข 22.7% inโ the second quarter,up 1.2โ percentage points from the previous quarter, according โคto CBRE data.
Despite reducing CREโ lending and selling portfolios to โprivate credit firms,commercial banks still holdโฃ the largest share of commercial or multifamily mortgages,at 38%,totaling โฃ$1.8 trillion as of the second quarter,according to the Mortgage Bankers Association.S&P Global Director of Financial Institutions Research Nathan Stovall wrote that provisions โคfor loanโ losses in 2026 โฃcould rise to 24% of net revenue, compared โwith 20.8% this year. โ
“Banks have arguably โฃbenefited from private credit firms growing their market share โขin CRE. But the industry is notโข wholly โout of the woods,” Stovall wrote.
