But one of the most damning figures that illustrates the doom headed for commercial real estate is the total value of mortgages that will mature in 2024. By Mortgage Bankers Association (MBA) projections, $929 billion of the $4.7 trillion outstanding commercial mortgages held by lenders and investors will come due this year, according to its Commercial Real Estate Survey of Loan Maturity Volumes report released Monday.

“Volatility and uncertainty around interest rates, a lack of clarity on property values, and questions about some property fundamentals have suppressed sales and financing transactions,” Jamie Woodwell, head of commercial real estate research at MBA, said in a statement. 

The problem is particularly bad for office buildings, Kevin Fagan, Moody’s Analytics head of CRE economic analysis, told Fortune, where “current vulnerability of CRE property performance is highly concentrated.” This will be troublesome for some tenants who may have “issues refinancing in a higher interest rate environment, which could further slow commercial real estate demand,” he said.

Office space surplus

Less demand for office space will lead to an even further glut. Last year, Cushman & Wakefield projected there could be 1 billion square feet of unused office space by the start of the new decade, and it’s likely to worsen as loans mature and more leases come to the end of their term.

And less demand means more office oversupply, which could lead to major price drops that could leave lenders and landlords in the lurch. Indeed, office prices could face a 30% price drop or “price correction” as a result of lower demand, according to a Morgan Stanley note.

“Office as a property type is confronting a secular challenge,” the bank said in a note on Sunday. “We are unlikely to see demand for office properties returning to pre-pandemic levels. This means that property valuations, leasing arrangements, and financing structures must adjust to the post-pandemic realities of office work. This shift has begun and there is more to come.”

The bank added that office prices have already dropped 20% from their peak, citing a data point from Real Capital Analytics. In mid-December 2023, Capital Economics released an outlook for 2024 predicting that commercial real estate property values would fall another 10% in 2024 after falling 11% in 2023.

While commercial real estate values and low occupancy rates illustrate the dire situation facing the market, it’s not the full story, Michael Imerman, a UC-Irvine Paul Merage School of Business assistant professor, told Fortune.

It is “much more about the financing that is in place,” he said, explaining that many commercial real estate developers took out large loans after the Global Financial Crisis in 2009 when interest rates were low. Many of those loans are now coming due. 

“With interest rates having increased so much over the past 18 months, the owners of these properties—the real estate developers and investors—will have to refinance at a much higher rate,” he said. “Couple that with the low occupancy rates, there is no way that these loans will be serviced, which is going to lead to a massive amount of commercial real estate loan delinquencies in the next few years.”

This is already coming to fruition. Delinquency rates for mortgage-backed commercial properties increased 6.5% during the fourth quarter of 2023, according to a January MBA report.

“Ongoing challenges in commercial real estate markets pushed the delinquency rate on CRE-backed loans higher in the final three months of 2023,” Woodwell said in a statement. “Long-term interest rates have come down from their highs of last year, which should provide some relief to some loans, but many properties and loans still face higher rates, uncertainty about property values and—for some properties—changes in fundamentals.”