Debt maturities loom large for retail properties in 2023, as economy grows more uncertain - Silicon Valley Business Journal

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Commercial mortgage-backed securities loans for 2,583 retail properties — encompassing 127 million square feet — are maturing in 2023, according to a CoStar Group Inc. analysis completed last week.

One segment of the retail real estate market to watch closely in 2023: Commercial loans set to mature next year in a tougher capital markets environment and a more uncertain economy.

Of these 207 properties, borrowers on 192 — representing 11.6 million square feet of retail — remain current on their loans. Foreclosure proceedings have been initiated for the rest of the properties, according to CoStar's analysis. During the height of the pandemic, it wasn't unusual for borrowers and lenders — especially on properties like retail, which were hit most acutely — to extend payment terms or make other arrangements as businesses were forced to shut down. But as the pandemic's effects have waned, borrowers facing the most difficulties with debt coming due will need to make decisions in a higher interest-rate environment and more uncertain economy about what comes next.

"I think there will be a period where those well-capitalized retail owners that had financed internally without having to go into the debt markets, and pay cash for tenant improvements to attract the right retailers ... are at an advantage if their balance sheet can support it and make capital improvements to properties," Hunter said.

"I think for the people proactively looking to buy, it’s going to become a matter of pricing," she said, adding retail is the most complex asset to price in commercial real estate."Until we see where the pricing shakes out, that’s when we’ll see volume pick back up in mid-2023," barring a major recession or geopolitical event, she added.

 

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