Capital Is Back, Lenders Are Hungry, and 2026 Is the Year to Move
The MBA-CREF Conference wrapped up this week in San Diego with a clear message: the commercial real estate finance market has turned a corner. Originations are projected to rise 27% to $805.5 billion in 2026, approximately $875 billion in commercial mortgages are set to mature this year, and capital is abundant. Here are the key takeaways for capital markets participants.
1. Debt Allocations Are Up and Conditions Are Borrower-Friendly. Debt capital is firmly ahead of equity in driving transaction volume. Many lenders are planning 25–50% volume increases this year, and the competition is producing real results for borrowers: higher leverage, tighter pricing, flexible prepayment, and less structure. Spreads have compressed across the board. The consensus is that rates are stable now but could widen later in the year — creating a near-term window for fixed-rate refinancing on quality assets. The “extend and pretend” era is over; lenders are no longer granting extensions on maturing loans. Bridge lending is increasingly being used as a strategic gateway to permanent loan products. CMBS lenders are tapping balance sheets for smaller transactions to feed future conduit executions, and life insurance companies are deploying bridge capital to drive short-term yields while securing permanent placements. Lenders want control of the full capital stack—and they’re competing aggressively to get it.
2. Life Companies Are Deploying Aggressively. Life company allocations are up significantly, with some preparing to deploy up to twice their 2025 capital. Spreads have tightened, and to maintain yield, many are showing increased flexibility in CM2 loan structures. The capital surplus is also pushing life companies into non-traditional asset classes — student housing, senior housing, agriculture, industrial outdoor storage, and cold storage are all attracting new attention.
3. Private Credit Is Reshaping the Competitive Landscape. Originations through private credit have grown meaningfully, creating direct competition for life companies and offering borrowers an expanding set of alternatives. Private credit providers are delivering strong liquidity with attractive returns, often double-digit on mezzanine debt. This is also influencing borrower behavior on the distressed side — a new generation of borrowers appears more willing to “hand back the keys” rather than work through a restructuring, given that non-traditional lenders may be less concerned with prior default history.
4. Agency Lending — Watch for Small Balance Changes. Freddie Mac is re-evaluating its small balance product, and changes impacting sub-$5M loans are likely. The agencies continue to offer their best pricing on loan sizes above $10M. On the positive side, MBA advocacy secured a 20% increase in GSE multifamily caps and FHA premium reductions, which should support agency volume.
5. Banks and Credit Unions Are Back. Regional and community banks have re-entered the market with conviction, particularly in larger metros with a strong regional bank presence and an appetite for CRE loans. Some of the larger money center banks will remain very competitive in select markets. Credit unions continue to provide compelling solutions for borrowers, with most offering no prepayment penalties, giving borrowers significant flexibility on exit timing and refinance optionality.
6. Equity Is Selective — Not Absent. Equity for construction and heavy bridge remains scarce, but conditions are improving for experienced sponsors with reset bases and realistic return expectations. Small-balance transactions under $10 million are drawing less institutional attention as capital chases larger deals. However, strategic correspondent relationships continue to provide consistent life company execution in the $2–$10 million space—a critical lifeline for smaller investors.
7. Capital Is Rotating Into Alternative Asset Classes. Beyond the traditional four food groups, capital is flowing into student housing (with underwriting focused on enrollment trends, endowment size, and in-person class requirements), senior housing (driven by baby boomer demographics and supply-demand imbalance), hospitality (stabilized post-pandemic but with NOI capped by rising wage and insurance costs), and build-to-rent and self-storage as diversification plays.
8. Office: Selective, Not Dead. Deals are getting done for office assets with diverse tenant rosters, long-term leases that won’t roll before loan maturity, experienced sponsors with equity commitment, and properties that have been right-sized for hybrid work. Lenders want to see adaptation, not nostalgia. Notably, more lenders are developing selective office lending products, signaling growing comfort with the asset class when the fundamentals check out. On the conduit side, pools have become comfortable carrying 15–20% office exposure, and that percentage is expected to tick up slightly through 2026 as the conduit ecosystem gains confidence in the recovery of well-positioned office assets.
9. Multifamily Is Still the Dominant Asset Class. Multifamily continues to dominate lending volume but is facing increased scrutiny. Due diligence at underwriting and servicing is intensifying — expect enhanced review of property management and operating expenses, expanded inspections and site visits, and a continued focus on fraud prevention. Watchlists and special servicing transfers have grown as deferred maintenance, fraud and life safety issues from the COVID era continue to surface. Conduit lenders are exploring a multifamily-only product with tighter pricing, though 10-year conduit aggregation remains difficult as borrowers favor the shorter 5-year term.
10. Insurance Is Bifurcating. Property insurance premiums have softened and stabilized, but liability premiums are surging — some seeing 30–40% increases. More carriers have entered the property market, creating healthy competition, but the liability side is a growing cost that borrowers and lenders need to underwrite carefully.
11. Valuations and Distress Remain Challenging. Accurate valuations in depressed markets are extremely difficult due to insufficient comp data. Appraisal-to-BPO variances continue to complicate distressed loan restructurings. Property values haven’t caught up with maturing balances, and more loans are moving into special servicing as a result.
12. AI Is a Tool — Not a Replacement. AI came up in nearly every conversation. The consensus: it’s valuable for administrative tasks, data ingestion, and productivity around risk assessment — but it is not replacing the need for human analysis, critical thinking, and oversight. Companies are investing in training to ensure it’s used appropriately.
Slatt Capital is a commercial real estate finance advisory firm. For more information on how current market conditions may impact your financing strategy, contact our team.