Most people who have bought a home understand how a fixed mortgage works: borrow, pay monthly, same rate for 30 years. Commercial real estate does not always work that way. A large share of 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 today that means locking in a rate materially higher than five years ago, putting pressure on margins. Sell, but as Larkowski points out, “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.” None of these options are comfortable.
In Arkansas, many 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,” Larkowski says. This shift creates an opening for first-time homebuyers and owner-occupants who may find more inventory available 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 a plan for rate changes. “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 to shore up debt on assets they want to keep—not distress, but portfolio management. The most at risk are those who refinance into higher rates, absorb margin compression, and then face pressure to raise rents in a market where tenants have more choices.
The maturity wall is a rolling pressure playing out over several years. For buyers in Central Arkansas and nationally, the implication is straightforward: more inventory is coming, investor competition is softening, and negotiating room for patient buyers is real. The most avoidable mistake in this market is waiting for perfect conditions while the opportunity is sitting in front of you.
