CRE debt is coming due. Can you trust your valuations?

One way organizations are addressing today’s valuation challenges is by using interactive, scenario-based valuation models.

Rather than anchoring property value to a single outlook, scenario planning helps leaders understand how sensitive an asset is to change. In the office sector, for example, owners can test how value and refinancing capacity respond if leasing slows or borrowing costs rise. That visibility helps pinpoint where assumptions begin to break down and which variables are driving them.

Scenario planning also helps leaders reframe conversations around risk tolerance, investment concentration and timing — especially for large or long-term projects.

“Teams aren’t always dealing with a broken model. More often, they’re not asking the right questions early enough — particularly around where investments are concentrated, or which risks haven’t been revisited in light of current market conditions,” Klemowits said. “That requires an awareness of how similar companies are responding to the environment and where blind spots tend to emerge.” 

• Income durability: Reviewing rent rolls, lease expirations, renewal assumptions and tenant credit to assess the stability of cash flows as debt matures.
• Expense and margin pressure: Evaluating operating costs, capital expenditures and net operating income trends to determine whether historical performance still rings true.
• Debt capacity and coverage: Analyzing debt service coverage and leverage under current market terms, rather than prior financing assumptions.
• Sensitivity to change: Assessing how valuation shifts if leasing weakens, downtime between tenants increases or borrowing costs rise further.

“Financial due diligence isn’t just a checklist to satisfy — it directly informs investment decisions and negotiations,” Klemowits said. “If a review shows leasing outlooks are weakening, an owner may decide to sell sooner rather than later or invest in re-leasing efforts sooner to stabilize the property.”

In commercial real estate, valuation pressure rarely emerges all at once. It builds gradually through changes in income, expenses, leasing behavior and debt coverage. By monitoring these indicators proactively, owners and investors can surface potential issues before they become critical and reflect those shifts in valuation accordingly. 

“It’s not that the metrics themselves are new,” Klemowits said. “It’s about paying closer attention to them. If tenants who always paid on time start paying a few days late, and that pattern spreads, that’s a signal worth investigating.”

Maintaining that level of visibility typically requires more than periodic reports. Owners benefit from integrated valuation models that combine leasing, operating and debt data and are refreshed as conditions change. These models should allow assumptions to be revisited regularly, stress-tested through scenarios and highlight emerging risk.

For many organizations, maintaining that level of integration and review cadence is challenging. Lean teams are often focused on operations and new initiatives, leaving limited capacity for continuous monitoring. External support can help maintain consistent valuation inputs, refresh assumptions regularly and provide an independent perspective grounded in current lender and market expectations without pulling internal teams away from core priorities.

As debt comes due in a tighter capital environment, CRE leaders should approach valuation with greater rigor and attention. Owners and developers who embed valuation into ongoing portfolio oversight will be better positioned to protect asset value and navigate the maturity wall with fewer surprises.

• Treat valuation as an ongoing process, not a periodic report. Update assumptions regularly so asset values reflect current leasing conditions, financing terms and lender expectations — not the environment from when the deal was originally underwritten.
• Pressure-test valuation assumptions before capital decisions are forced. Use scenario planning to understand how value and refinancing capacity shift if income softens, borrowing costs rise or timelines extend.
• Use financial due diligence to validate what’s changed. Reassess rent rolls, tenant demand, operating costs and debt coverage to determine whether historical metrics still support today’s valuation.
• Build early-warning indicators into portfolio reviews. Monitor leasing trends, tenant behavior and debt metrics more frequently so emerging pressure is reflected in valuation before options narrow.
• Address refinancing risk proactively. If valuation and due diligence suggest refinancing may be constrained, get ahead of that risk — whether that means adjusting leverage, bringing in capital partners or adjusting the timing of a sale.