The Writing on the Maturity Wall: Commercial Real Estate Performance and Rollover Risk

We document a causal link between rising refinancing costs and deteriorating commercial real estate performance. Properties facing imminent loan rollovers experience sharper declines in net operating income and occupancy rates, particularly those with higher rollover risk—characterized by elevated loan-to-value ratios and lower debt service coverage ratios. Our analysis further reveals that properties with elevated refinancing costs curtail investment following tenant turnover, particularly as they approach maturity, because sales under rollover risk lead to significant price discounts. Our evidence suggests that debt overhang under rollover risk is a key mechanism driving commercial real estate underperformance.