The balloon payments are arriving. A large share of commercial real estate 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, which drains capital most investors would rather deploy elsewhere. Refinance, but that means locking in a rate materially higher than five years ago, putting pressure on margins built around lower debt service. Sell, but that works when buyers are ready. 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.
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 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. He describes a forced correction among investors who took on leverage without building in a plan for when 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 investors are selling lower-priority properties now and using proceeds to shore up debt on assets they want to keep. The ones most at risk are those who refinance into higher rates, absorb margin compression, and face pressure to raise rents in a market where tenants have more choices.
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.
