Most people who have bought a home understand how a fixed mortgage works: borrow, pay monthly, same rate for 30 years. Commercial real estate does not always work that way. A large share of loans written in 2020 and 2021 were structured with 20 or 25-year amortization schedules but balloon payments due after just five years. The math worked when interest rates were near historic lows. It looks different now.
Jerry Larkowski, a dual-licensed attorney and Managing Broker at ESQ. Realty Group, LLC in Little Rock, Arkansas, has been watching the pressure build in real time. “There is about $3 trillion worth of commercial debt out there that had its genesis in the low rates of 2020, 2021 and early 2022 that are now coming due, and the rates are a lot higher,” he says. Industry data backs that up. According to the Mortgage Bankers Association, roughly $875 billion in commercial and multifamily loans are expected to mature in 2026 alone. Analysts project more than $4 trillion in CRE debt will come due between 2025 and 2029. The wave is not cresting. It is still building.
When a balloon payment arrives, investors face a short list of choices. Pay it off in full. That drains capital most investors would rather deploy elsewhere, and it is rarely the first instinct of anyone running a portfolio. Refinance. The problem is that refinancing today means locking in a rate that is materially higher than five years ago. Higher payments put pressure on margins that were already built around lower debt service. If rents have not kept pace, the numbers stop working. Sell. That option works when buyers are ready. But Larkowski points out that this is exactly the environment where investor sellers are multiplying while investor buyers are pulling back. “If everybody’s selling, the demand isn’t really any higher, the supply is higher, which means people are either going to have to wait a longer period of time to sell or they’re going to have to lower their price,” he says. There is nothing comfortable about any of those three.
Larkowski holds commercial loans himself and has watched several investor clients move toward selling over the past year. In Arkansas, many of the properties entering the market are single-family rentals financed like commercial assets, with balloon structures and five-year terms. “Rent houses, in a way, are commercial. They may be residential structures, but to the investors, they’re commercial. They’re doing it for a profit,” he says. That shift creates an opening. First-time homebuyers and owner-occupants who have been priced out or sitting on the sidelines may find more inventory available than they have seen in years, as investors exit positions they can no longer hold profitably.
Larkowski is not predicting a collapse. What he is describing is a forced correction among investors who took on leverage without building in a plan for when the rates changed. “If you’re a wise investor, you kind of prepare for these things. You know that these things are going to happen. And if you’re a good investor, you’ll land on your feet no matter what,” he says. Some of the investors he works with are selling lower-priority properties now and using the proceeds to shore up the debt on assets they want to keep. That is not distress. That is portfolio management. The ones most at risk are those who refinance into higher rates, absorb the margin compression, and then face the additional pressure of raising rents in a market where tenants have more choices than they did two years ago.
The maturity wall is not a single event. It is a rolling pressure playing out over several years. For buyers in Central Arkansas and nationally, the practical implication is straightforward: more inventory is coming, investor competition is softening, and the negotiating room available to patient buyers right now is real. The most avoidable mistake in this market is waiting for perfect conditions while the opportunity is sitting in front of you.
