The rising interest rate environment has sent shockwaves through the commercial real estate (CRE) market, particularly for multifamily properties, retail properties, single-tenant net leased (STNL) assets, mobile home parks, and self-storage facilities. Borrowers and lenders nationwide, especially in Florida and the Southeast, have resorted to "extend-and-pretend" strategies to manage the growing wave of loan maturities. This tactic involves renegotiating loan terms before defaults occur, forestalling immediate consequences but failing to address underlying financial challenges. However, this approach is nearing its limits as stakeholders grow increasingly impatient.
According to a recent Gray Capital research brief, "extend-and-pretend is coming to an end" as lenders and equity holders seek resolutions to their growing liabilities. Many borrowers, particularly those in the multifamily sector, are struggling to raise the additional capital needed to refinance or repay their debts. Lenders, meanwhile, are beginning to shift their focus toward mitigating long-term risks, resulting in a more critical approach to underwriting. This shift is evident across Florida and the Southeast, where CRE activity has been strong, but financing hurdles are becoming more pronounced.
Critics of extend-and-pretend argue that it merely postpones the inevitable reckoning. Research from the Federal Reserve Bank of New York highlights the financial strain this strategy places on banks, particularly those exposed to CRE. Big banks have begun quietly offloading portions of their CRE portfolios to mitigate exposure, especially in sectors like office properties, which face ongoing headwinds. Nationwide lenders are increasingly cautious, prioritizing liquidity and preparing for potential write-downs.
Gray Capital’s analysis, using data from CoStar, points to a significant wave of CRE loan maturities peaking in 2026, with multifamily loan maturities spiking in Q3 of 2025. Multifamily cap rates have risen from approximately 4.25% in early 2022 to 5.5% in 2024, reflecting higher financing costs. While multifamily unit prices have rebounded to around $200,000 per unit, up from mid-2023 lows, the market remains under pressure as bridge loans and construction loans near maturity.
The report also anticipates a slower reduction in federal funds rates compared to the sharp increases seen in 2022. Elevated interest rates will continue to challenge borrowers nationwide, particularly those reliant on commercial bridge loans to stabilize properties. Bison Financial Group, based in St. Petersburg, Florida, has observed these dynamics firsthand as it navigates opportunities for clients in the multifamily and STNL sectors, offering creative financing solutions tailored to the current market.
Despite challenges, opportunities are emerging. Multifamily construction starts have dropped significantly following record completions in 2023 and 2024. This decline in new supply, coupled with rising loan maturities, is expected to create distressed investment opportunities. Investors focused on Florida and the Southeast, regions known for strong population growth and CRE demand, may find value in repositioning distressed assets for long-term gains.
As the extend-and-pretend era winds down, the commercial real estate market faces a pivotal moment. Stakeholders, including firms like Bison Financial Group, must adapt to the evolving landscape by balancing risk with opportunity. For investors, understanding the nuances of loan maturities, cap rate movements, and regional market dynamics is critical to navigating the challenges ahead.
Author: Jared Repka 
About the Author:
Jared Repka is the Co-Founder of Bison Financial Group in St. Petersburg, FL.
Bison arranges debt and equity financing for commercial real estate investors and developers.
Bison has relationships with investors across the risk spectrum funding acquisitions, renovations, and new construction.
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