US Regional Banks Navigate Commercial Real Estate Challenges as Office Loan Troubles Persist
NEW YORK – US regional banks are facing ongoing headwinds from the commercial real estate (CRE) sector, particularly with office loans, despite efforts to scale back lending and offload portfolios. Approximately $804 billion of US CRE mortgages are maturing this year,according to S&P Global,with roughly $936 billion set to mature next year - an 18.6% increase from 2025. Maturities are projected to peak at $1.1 trillion in 2029, according to S&P Global Market Intelligence estimates.
The office sector remains a key concern.Moody’s Analytics director of Economic Research Ermengarde Jabir told Reuters that approximately one-fifth of all 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 estate market. Biotech funding slowdowns and limited access to public markets are causing companies to pause expansion plans, impacting demand for lab space. The overall lab vacancy rate across the top 13 life sciences markets rose to 22.7% in the second quarter,up 1.2 percentage points from the previous quarter, according to CBRE data.
Despite reducing CRE lending and selling portfolios to private credit firms,commercial banks still hold the largest share of commercial or multifamily mortgages,at 38%,totaling $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 for loan losses in 2026 could rise to 24% of net revenue, compared with 20.8% this year.
“Banks have arguably benefited from private credit firms growing their market share in CRE. But the industry is not wholly out of the woods,” Stovall wrote.