While most real estate professionals focus on interest rate predictions and inventory shortages, Jerry Larkowski sees a different dynamic on the horizon: a massive wave of commercial real estate debt about to come due, and he believes savvy investors who understand the landscape will find significant opportunities over the next 18 months.
Larkowski, Executive Broker/REALTOR® with ESQ. Realty Group, LLC in Little Rock, Arkansas, points to approximately $3 trillion in commercial real estate debt structured with five-year balloon payments that will mature over the next 12 to 18 months. Properties financed four to five years ago at significantly lower rates now face refinancing at interest rates roughly 150% higher than their original terms.
“A lot of times you will finance real estate on a 20, 25, 30-year amortization, just like a house note, but there’s a five-year balloon on it,” Larkowski explains. “Those interest rates from four and a half years ago are a lot sexier than they are now, and all of those are about to balloon.”
The implications extend across the entire commercial real estate spectrum, from individual investors holding $200,000 rental properties to large institutional holdings with significantly more zeros attached. Larkowski reports already seeing early indicators among smaller investors in his market, with four former clients either listing or preparing to list properties as balloon payments approach.
Property owners facing this refinancing crunch have limited options: dip into cash reserves and absorb higher payments, raise rents and risk losing tenants, or sell into a challenging market. For buyers, this creates what Larkowski sees as a significant opportunity, provided they understand the landscape correctly.
“I think buyers are going to have an opportunity to buy houses this year from investors who know they don’t want to have to raise rents enough to cover it and run off their tenants,” Larkowski notes. The strategy involves finding distressed sellers, negotiating prices that make monthly payments sustainable at current rates, and targeting properties that have been well-maintained throughout their lease terms.
Larkowski pushes back firmly against widespread optimism about interest rates returning to pre-pandemic levels. While many buyers have sat on the sidelines waiting for rates to drop into the low fours or fives, Larkowski argues that expectation is fundamentally disconnected from economic reality.
“Every chief economist I hear or read about is surprised that rates dipped below six for the couple of weeks that they did,” he observes. “They’ve got to stay below six or stay below 5.75 for a measurable amount of time, not just a week or two to flirt with people.”
His advice to buyers reflects this pragmatism: find properties that fit current financial parameters rather than waiting for favorable conditions that may never materialize. Banks wouldn’t pre-qualify borrowers for amounts they cannot afford, he argues, and regulatory oversight ensures lending standards remain sound even as federal agencies streamline operations.
For investors considering where to deploy capital during this transitional period, Larkowski makes a strong case for heartland markets like Arkansas over coastal alternatives. Property values in the middle of the country follow what he describes as a healthy heartbeat pattern, steady and predictable, rather than the dramatic swings that characterize markets on both coasts.
“We’re in the heartland. A lot of people like to call us the flyover states,” Larkowski acknowledges. “But property values are better here, quality of life is better, and there just seems to be so much more drama on the coasts.”
Arkansas offers additional structural advantages: lower property taxes compared to most of the country, a state government actively reducing income tax burdens, and proximity to Dallas, projected to become the fourth-largest metropolitan area in the country by 2030. The state sits just four hours from that growth engine, positioned to benefit from expansion without experiencing the same cost pressures.
Larkowski’s perspective carries additional weight given his legal background, which allows him to guide clients through the complex processes of buying and selling real estate with depth that purely transaction-focused agents cannot match.
His philosophy for 2026 boils down to a simple directive: stop waiting for perfect conditions that aren’t coming. “There’s never a bad time to buy or sell a house,” he notes. “Between us, there are better times and there are worse times, but if somebody’s been ready to jump in the pool, jump on in. The water’s fine.”
About ESQ. Realty Group, LLC: ESQ. Realty Group, LLC serves the Little Rock, Arkansas market, specializing in residential and commercial real estate for both investors and owner-occupants. The firm combines traditional brokerage services with legal expertise to guide clients through complex real estate transactions. Learn more at esqbrokers.com.
Disclosure: Individuals or companies mentioned may have a commercial relationship with KeyCrew.
