The US commercial real estate debt due before the end of 2025 amounts to about $1.5 tn, Invest-Gate reports.

Morgan Stanley analysts, including James Egan, said: “refinancing risks are now the focus of attention” for property owners, including office buildings, stores, and warehouses.

The investment bank estimates that valuations of retail and office properties could drop 40% from peak to trough, increasing the risk of default.

Small and regional banks – the most significant source of credit for commercial real estate last year – were affected by deposit outflows after the collapse of the Silicon Valley bank, raising fears that their ability to provide financing to borrowers would be undermined.

Morgan Stanley’s note indicates that the funds required to be repaid will jump over the next four years, reaching $550 bn by 2027.

Further, banks own more than half of the commercial mortgage-backed securities issued by the mortgage-backed security agency and issued by US government-sponsored entities such as Fannie Mae, increasing their exposure to the sector.

Analysts stated that the role that banks play in this system, not only as lenders but also as buyers, will increase the volume of near-maturity debt.

However, rising interest rates and concerns about defaults have already affected deals in commercial mortgage-backed securities. Sales of non-government-backed securities were down about 80% in the first quarter from a year ago.

Analysts mentioned that conservative lending standards in the aftermath of the financial crisis provide borrowers, and lenders, some degree of protection from a decline in value as debt syndicate’s offices expect between $10 bn to $15 bn from issuance of US investment-grade corporate bonds, compared to about $9 bn last week, meanwhile, in Europe, the majority of those surveyed expect at least €15 bn in sales.