Five- and 10-Year CMBS Loans: Which Vintage Might Crash the Office Market?

In an age of distress, defaults and workouts, many insiders across the office sector are quoting Michael Corleone in “The Godfather Part III” when it comes to commercial mortgage-backed securities (CMBS): “Just when I thought I was out, they pull me back in.” 

To think, 2025 was the year that office finally appeared to recover. Those months featured numerous eye-popping single-asset, single-buyer (SASB) deals — including Tishman Speyer’s $2.85 billion refinancing for The Spiral in Hudson Yards — and saw the payoff rate of office CMBS reach 70.1 percent by total loan count, an increase of 11.3 percent from 2024. 

SEE ALSO: Miami Beach’s Goodtime Hotel Faces $149M Foreclosure Suit

But, in the opening months of 2026, that era of good feelings has fallen by the wayside. 

Delinquency rates for office loans in CMBS pools hit an all-time high of 12.34 percent in January, before dipping slightly to 11.4 percent in February, according to Trepp, a commercial real estate analytics firm. 

Morningstar DBRS, a CRE analytics firm, estimates that more than $100 billion in fixed-rate and floating-rate CMBS loans (among all assets) will come due in 2026, and expects more than half of those loans will fail to repay at maturity. The loans will immediately transfer to non-performing status under special servicers, as required by securitized loan covenants. 

Morningstar called office maturity defaults “the primary driver” of 2025’s elevated delinquency rates, a pattern it expects will continue in 2026, with the asset class making up as much as one-third of the scheduled maturities this year.  

“Every month we hear success stories in the media surrounding office properties being sold and the return-to-office mandates, but we’re still seeing massive amounts of office buildings that don’t have enough tenants and don’t have a sufficient framework to be able to operate profitably, or even pay their debt service,” said Mark Silverman, a partner and CMBS workout specialist at law firm Troutman Pepper Locke. 

Sponsors can’t service their debt because tenancy has yet to recover from COVID-19 and the work-from-home paradigm shift that has become a permanent fixture in the American economy. 

Lisa Knee, managing partner of real estate services at EisnerAmper, a global accounting firm, said CMBS office distress is not being driven by sponsors missing monthly payments. Instead, it’s been caused by maturity defaults, when a building cannot repay or refinance its debt to a lender when it comes due after five or 10 years. 

“These loans are still cash flowing, but you simply can’t refinance them in today’s rate environment, with the valuation differences,” said Knee. “It’s not that people aren’t servicing debt. The paper is coming due, but there’s nothing to replace it that can make sense.” 

The U.S. office vacancy rate was 18.2 percent at the start of 2026, according to a Yardi Matrix analysis, about the same as the 19.8 percent rate a year earlier. Kastle Systems, a firm that tracks worker attendance, found that overall occupancy in office buildings was only 54 percent of pre-pandemic levels in both 2024 and 2025, per Colliers. 

Chad Carpenter started Reven Office REIT in February 2024 with the expectation of pouring $1 billion into distressed office. Two years in, after months of underwriting, he told Commercial Observer that, based on his assessment, 85 percent of U.S. buildings would need to get either foreclosed or restructured with a lender-assisted sale. Out of that total, 20 percent to 30 percent could be “functionally or economically completely obsolete, based on a lack of demand,” he said. 

“Two years ago, I said, ‘This will get worse, the bottom is four or five years out,’ and that was two years ago,” said Carpenter. “The reason for this is we were underwriting so many loans that didn’t pencil. Even if you used conservative underwriting, nobody was going to be able to refinance.”  

Much of the uptick — and fear — surrounding office CMBS distress is due to the headline-grabbing defaults of major assets. January alone saw SL Green and RXR default on $940 million in senior debt tied to One Worldwide Plaza in Midtown, and Brookfield Properties default on an $835 million CMBS loan secured by One New York Plaza in Lower Manhattan. 

But Stephen Buschbom, Trepp’s research director, said the delinquency rate dropped by 1.14 percent from January to February, largely because a handful of large office loans were modified and went from non-performing to performing.

“My hope is that we’ve, more or less, reached the peak and will go sideways from here,” Buschbom said. “Large loans push around that delinquency rate so easily — three $100 million-plus office loans that go delinquent or cure will move it around — and we’ve seen some megadeals do exactly that.”  

Regardless of where the true numbers lie, the current state CMBS office distress points to an ugly story for the asset class. 

Michael Cohen, a CMBS workout specialist at Brighton Capital Advisors, said the market has officially left the asset devaluation period and we’ve now entered the transfer of asset period, where there will be either a wave of bank foreclosures and loan sales secured by office buildings — or owners will sell at steep discounts, fueling further value destruction. 

“It’s not a question if these loans have lost value. It’s a question of when they will be recognized,” said Cohen. “If the old mantra was ‘Survive in 2025,’ then it’s now ‘Fix in 2026.’ You better be able to fix your loan in 2026, or you will lose it.”

An end to ‘extend and pretend’

A quick history lesson, if you will. 

After the economic uncertainty and value destruction wrung by COVID in 2020 and 2021, many office sponsors — whether their debt execution was CMBS or balance sheet — sought refuge in complex, drawn-out negotiations with their lenders or CMBS special servicers. Here, they would plead for more time, extend the maturity two to three years, and scramble for cash, while lenders would kick that can down the road. 

For all intents and purposes, the era of “extend and pretend” is over. 

“The lenders are not willing to take the hits anymore without borrowers coming to the table and bringing a significant amount of funds to proceed forward,” said Troutman Pepper’s Silverman. “Many borrowers aren’t coming to the table with a practicable outcome. They’re just looking for time, but time isn’t an answer and time doesn’t help the situation.” 

When the clock runs out, a CMBS trust’s controlling class representative, appointed to make decisions on behalf of the trust in sticky situations, will force either foreclosures on properties, discounted payoffs, value destructive short sales or, at best, equity recapitalizations. 

“We’ve been living in an ‘extend and pretend’ environment for a pretty long time, but what’s changed is the market has run out of patience,” said EisnerAmper’s Knee. “It’s just going to make it tougher.” 

Carpenter emphasized that underwriting a new loan on an office asset today just won’t make sense for lenders unless an office is nearly 100 percent leased. While that’s largely the case with trophy Class A buildings like One Vanderbilt in New York, Citadel Center in Chicago and Transamerica Pyramid in San Francisco, most office buildings can no longer command that demand and generate the pre-2020 revenue forecast on the debt. That renders a refinancing attempt useless. 

“Now the sponsors are trying to buy the notes back that they couldn’t sell or refinance, and the lenders are getting deal fatigue,” said Carpenter.  

Others involved in the realm of office distress, like Jay Neveloff, chair of the U.S. real estate practice at HSF Kramer, argue that the distress in CMBS “is a bit deceptive,” as there’s a natural tension between master servicers, who handle performing loans, and special servicers, who handle non-performing loans. Months of stalemate can rack up lucrative fees, but the time it takes to resolve issues only contributes to an ongoing uptick in distress. 

“There’s a delayed reaction — it takes a longer time, structurally, for CMBS to confront problems and deal with them,” said Neveloff. “It’s not like portfolio lenders were prompt. They sat on the sidelines for a while, too.”

Moreover, explained Neveloff, the capital-intensive nature of offices makes them “a particular animal” compared to other asset classes, one where owners are more willing to give back the keys, wash their hands of the costs and add to the distress metrics, even if the asset is performing.    

Neveloff’s colleague, Dan Berman, managing partner of U.S. real estate at HSF Kramer, said that while he’s seen borrowers hand back the keys last year and servicers dig in their heels, the opening months of 2026 have seen more workouts and agreements between the two sides. 

“It seems like it’s shifted. They’re working through stuff, getting things done. I’ve seen clients get into the control positions and try to work with servicers and restructure to figure things out,” Berman said. “It seems this might be the year we hit the wall, but I feel like we keep hearing that every year.”

Vintage season

The main reason why 2026 may very well be the year of reckoning is because an enormous wall of overall CRE maturities — $875 billion — is scheduled to mature. Of that total, $148 billion is secured by office properties, according to the Mortgage Bankers Association (MBA). 

Compare this to a few years ago, when the MBA estimated $92 billion and $58 billion in debt for office buildings would come due in 2023 and 2024, respectively. 

But the perverse twist in all this is the dueling channels of stress put on the market from 10-year CMBS vintage — loans originated and securitized in 2016, years before COVID entered the collective lexicon — and five-year CMBS vintage — those that hit the market in 2021, during the post-pandemic era of low cap rates, easy money and even lower interest rates. 

A February 2026 report from Trepp titled “CMBS Hard Maturity Playbook” examined payoffs from the most recent 10-year and five-year vintages: the 2024 maturity wall of CMBS loans (for all asset classes) originated in 2014 and 2019.  

Trepp found that for the 2014 vintage, 60 percent, or $13.4 billion of the $22.5 billion due, paid off at or before maturity, while $6.5 billion (29 percent) did not pay off. When it came to the 2019 vintage, only 42 percent, or $2.8 billion of $6.7 billion due, paid off at or before maturity, while $3.2 billion (47 percent) did not pay off.  

“The 2014 vintage matters because of scale — even with the majority of loans paying off on time, a $6.5 billion unresolved balance that spends a large share of time non-performing can keep maturities showing up in delinquency prints,” Trepp wrote. “[2019] is the vintage with the clearest delinquency risk signature: Nearly half didn’t pay off, and the unresolved balance spent most of its post-maturity life non-performing.”

So, if both five- and 10-year vintages are bad, which is worse now that we’re staring down the barrel in 2026?

Trepp’s Buschbom, who authored the report, told CO that coming out of the Global Financial Crisis, some of the most dramatic loss events he saw were from five-year loans, and that the five-year vintage originated in 2021 would be more concerning. That’s because of the essentially zero percent interest rate environment at that time, and that lenders were still underwriting to pre-COVID standards. 

“With debt from a five-year loan instead of 10-year, you don’t have nearly the same amount of time for value growth and lease growth, so you’re essentially compressing your return metrics and the targets you’re trying to hit into half of the typical loan cycle,” he explained. 

Brighton Capital’s Cohen said that the best way to think about the severity difference between 10-year and five-year CMBS maturities is to ask when cap rates — the expected annual rate of return of a property — were most aggressive (i.e. lowest). 

He said that anything bought or originated between 2018 and 2022 is now most at risk because its initial interest rates were lowest and cap rates were tightest (meaning the purchase price was high relative to asset income, indicating high market demand, low risk and thus a lower cap rate). 

“For 10-year deals, originated in 2016, I believe the majority of those have been refinanced out, because the interest rates came way down in 2019 and 2020, and a lot of borrowers refinanced out of those,” said Cohen, indicating his concerns lie with the five-year vintage.  

Carpenter said he’d put 10-year vintage and five-year vintage “in the same boat,” as unless an office building is in the top 15 percent of stock, it likely won’t have the cash flow to refinance at a traditional 65 percent loan-to-value. He had one caveat: Five-year loans are more dangerous because interest rates and cap rates were lower in 2021, so valuations were higher, meaning most sponsors likely borrowed a lot more debt than than 10 years ago. 

The main problem for office CMBS is that office is easily the most distressed asset class of the big five. The Trepp report found that while 36 percent of multifamily and 21 percent of retail failed to pay off at maturity, a stunning 57 percent of office loans failed to pay off in the 2024 pool. 

Christopher Dickson, a partner at law firm Cadwalader, Wickersham & Taft, said that much of the 2026 office maturity pipeline will be concentrated in the third and fourth quarters of the year, when the ability to refinance will be contingent on where interest rates stand with new Federal Reserve leadership.

“Who knows what the interest rate environment will look like at that point in the year, but I don’t think a lower interest rate environment will solve all that ails the office market,” Dickson said. 

He said one additional complication is that many CMBS office loans received short-term extensions in 2024 during a uniquely high interest rate environment due to inflation. So the stress stemming from these troublesome extensions will combine with that 10-year (2016 vintage) and five-year (2021 vintage) in the months ahead. 

“If you recall, the mantra for 2024 was ‘extend and pretend,’ so part of me thinks there’s a big chunk that were extended in 2024, where it’s common to use a two-year loan extension to kick the can down the road, and those loans are coming home to roost now, too,” said Dickson. 

Inflexion or infection 

Here’s where the rubber meets the road. CMBS accounts for about 13 percent of the total outstanding CRE U.S. mortgage debt, which is estimated at around $5.8 trillion, bringing the securitized debt total to around $784 billion. Of that, office makes up a disproportionately large share of CMBS, estimated by Trepp at 27 percent, giving the securitized office market a $192 billion capitalization.

Reven’s Carpenter said that if 12 percent of that is impaired and not paying off, one must then take into account the entire ecosystem of banks, insurance companies and private credit, which are theoretically facing distress levels of 12 percent on the office loans they made.  

“It’s a much bigger problem,” he said. “The wall of maturities have come due in the last two years, and the ones that aren’t resolved are building on maturity defaults that are being extended, and half the loans due are either reaching maturity defaults or being extended.” 

Others are not so worried. Trepp’s Buschbom emphasized that banks and life companies typically originated more conservative LTVs compared to CMBS lenders, so if the starting LTV is lower, then the borrower needs to experience drastically more value destruction for the balance sheet lender to take a sizable loss. 

“There might be some distress, but the final loss will be smaller, on average, for life companies or banks,” he said. 

However, Buschbom was quick to caution that suburban office, medical office, life sciences office and urban office are all different creatures. Different balance sheet lenders will be affected by their varying levels of distress — many regional banks, for instance, went all in on medical office. 

“I think it’s contained,” said HSF Kramer’s Neveloff. “A lot of what we’re seeing is a buildup over the past few years, where CMBS lenders didn’t do anything, they didn’t push restructurings or enforcements, and so you’re seeing more delinquents now because enforcements are being declared.”

Carol Faber, co-chair of the distressed property practice at Akerman, said the amount of money in the market, whether for rescue equity or lending, has given her a sense of “cautious optimism” when holding her breath around the true extent of CMBS office distress. 

“My sense is it’s more limited, it won’t infect the system,” she said. “I don’t think we’ll see a system problem, a 2008 [financial crisis].” 

But there are questions surrounding the rescue equity that could bail so many distressed office borrowers out of their bad loans, CMBS or otherwise. 

“Equity is coming in and it’s a strategic recovery, it’s going to be slow and uneven, and people are looking at it differently,” said Knee, who said rescue equity might look more like debt in terms of the returns. “But it’s going to be a multiyear process, a patience game.”

Brian Cohen, partner and chair of the New York City real estate practice at law firm Goulston & Storrs, said that a lot of groups have formed rescue equity syndicates around the distress, but the complex machinations within CMBS investment pools, with its numerous bondholder tranches, are having a chilling effect on rescue capital’s appetite to invest.  

“One of the complications, particularly for CMBS, is that the restrictions of transferring equity and control are particularly limiting to give rescue equity enough comfort that they could eventually take control of the asset,” he explained. 

Silverman said that if the rescue equity in CMBS deals alters capital stacks, and depending on who owns which piece of the borrower’s debt, it then requires laborious negotiations hinging on lender consent, a process that could quickly complicate things for the worse. 

“If the borrower comes to the table and says, ‘I’m restructuring things and we’re infusing equity,’ if they don’t get lender sign-off on that, it will trigger defaults and potentially recourse,” he said. 

Whatever happens next, the market will still have its skeptics on whether 2026 is the year that office distress, especially in CMBS, causes the long-awaited maturity wall to crash down upon U.S. commercial real estate. 

“There are smart people saying this is the year it shakes it,” said HSF Kramer’s Berman. “It could be. Maybe I’m looking at it with a jaundiced eye, but I keep hearing that every year, and somehow the wave doesn’t crash. Life goes on and people continue to work things out. It’s just not something that alarms me.” 

Brian Pascus can be reached at bpascus@commercialobserver.com.