Developers Elevated Financing Costs and Refinancing Risk

For commercial real estate developers, today’s financing environment feels very different than it did just a few short years ago. Interest rates are higher, lenders are more cautious, and a wave of loan maturities is approaching that will test even the most seasoned operators. According to the Mortgage Bankers Association, nearly $1.8 trillion in commercial real estate debt is set to mature by 2026 nationwide. That is a massive volume of loans that will need to be refinanced in a market where capital is tighter and underwriting standards are far more conservative.

These conditions are forcing developers to navigate risks that were not as pronounced in prior cycles. Projects that once penciled out easily are now challenged by debt service costs. Refinancing strategies that seemed straightforward just a few years ago have become uncertain. For developers working on acquisitions, repositioning, or ground-up construction, access to reliable capital is not just helpful, it is critical.

The Challenge of Higher Interest Rates

For much of the past decade, developers benefited from historically low borrowing costs. Financing was plentiful and affordable, which fueled transaction volume and encouraged aggressive deal structures. That environment has shifted. With benchmark interest rates at their highest levels in more than 20 years, debt is not only more expensive but also harder to qualify for.

Consider a project that might have been underwritten at 4 percent debt just a few years ago. Today, financing that same project could mean borrowing at 7 percent or more. That difference directly impacts cash flow, debt service coverage ratios, and ultimately, valuations. Deals that looked promising when capital was cheap may no longer meet lender thresholds under current rate conditions.

For developers, this means reassessing pro formas, tightening assumptions, and in many cases, seeking out alternative sources of financing that can provide more flexibility than traditional banks.

Refinancing Risk on the Horizon

Beyond new acquisitions and development, refinancing is becoming a pressing issue. With so much commercial real estate debt maturing between now and 2026, the risk of loans coming due in a less favorable interest rate environment is significant. Developers who financed properties five or ten years ago may be looking at refinancing terms that are materially worse than their existing debt.

Even stabilized assets are not immune. Properties that once enjoyed healthy cash flows can find themselves struggling to meet the stricter debt coverage ratios required by today’s lenders. Those holding floating rate debt face an additional layer of pressure, as rising rates have already eroded cash flow and made refinancing more urgent.

This refinancing risk is compounded by the cautious posture of many traditional lenders. Banks and institutional players are tightening credit boxes, reducing loan-to-value ratios, and demanding more equity from sponsors. Developers who counted on rolling over loans with relative ease are finding the process far more complicated.

Why Flexibility Matters Now

In an environment like this, flexibility is key. Developers cannot afford to wait on slow-moving institutions or hope that rate conditions improve before a maturity deadline. Capital that can be structured to meet project-specific needs, delivered quickly, and managed by a partner who understands the realities of the development world is what keeps projects moving forward.

Private lending has become an essential solution for many developers facing today’s challenges. By providing financing that bridges gaps left by banks, private lenders can help sponsors refinance maturing debt, move acquisitions forward, or inject liquidity into projects that might otherwise stall.

The Role of Evoque Lending

This is where Evoque Lending comes in. For over two decades, Evoque has been a trusted partner to developers and commercial real estate investors across California. Unlike traditional lenders, Evoque focuses on delivering speed, flexibility, and certainty of execution.

When a bank hesitates, Evoque steps in to structure financing that meets the needs of the project and the sponsor. This could mean providing bridge financing to cover a looming loan maturity, funding an acquisition when timing is critical, or offering capital for construction and repositioning strategies that traditional lenders shy away from.

Because Evoque is not bound by the same rigid constraints as banks, it can tailor solutions around the realities of today’s market. That kind of partnership is particularly valuable now, when higher interest rates and cautious lending standards are making it more difficult for even strong developers to move forward.

Protecting Projects and Preserving Opportunity

At the end of the day, the goal for developers is not simply to survive the current market, but to preserve opportunities and position themselves for long-term success. Those who are proactive about refinancing risk, creative in their capital strategies, and open to alternative lending partners will be better prepared to weather the challenges ahead.

With $1.8 trillion in commercial real estate debt set to mature in the next two years, the developers who act early will have more options than those who wait until maturities force their hand. Working with a partner like Evoque Lending provides not only the capital to bridge today’s gaps, but also the confidence to keep building and investing in the projects that will define tomorrow.

Looking Forward

The commercial real estate industry has always been cyclical. Periods of easy credit are followed by times of tighter capital, and developers who adapt are the ones who endure. Elevated financing costs and refinancing risks are the current reality, but they also create opportunities for those prepared to act decisively.

By rethinking financing strategies, leveraging partnerships with private lenders, and approaching projects with discipline and creativity, developers can navigate this environment and continue to move their visions forward.

The challenges are real, but so are the solutions. Evoque Lending stands ready to be the kind of partner developers can count on, not only to meet today’s financing needs, but to help secure the future of their projects and portfolios.