‘Extend and pretend’ era ends as real estate lenders take losses

May 15, 2026 - 17:42

Major lenders including Goldman Sachs and Deutsche Bank are shifting strategy on troubled commercial real estate, choosing to foreclose on distressed properties or sell off non-performing loans rather than kicking the can down the road. The move marks a clear end to what industry insiders call the "extend and pretend" era, where banks avoided recognizing losses by repeatedly extending loan terms.

For years, many financial institutions hoped that falling property values would rebound, allowing them to avoid painful write-downs. But persistent high interest rates, declining office occupancy, and tighter credit conditions have made that wait-and-see approach untenable. Now, banks are accepting steep losses to clean up their balance sheets.

Goldman Sachs recently unloaded a portfolio of troubled office loans at a significant discount, while Deutsche Bank has moved to foreclose on several commercial properties in major U.S. cities. These actions signal a broader reckoning for the commercial real estate sector, which has been under pressure since the pandemic shifted work patterns and retail habits.

The willingness to take losses now is driven partly by regulatory pressure and partly by a desire to move past the uncertainty. Analysts say more pain is likely ahead, as billions of dollars in commercial mortgages come due in the next two years. Lenders who once hoped for a soft landing are now bracing for a harder reality.