CRE Debt: First Half 2026 Review & Second Half Outlook

The Market in One Line

CRE debt markets have moved from “deep concern” to “the new normal”: capital is plentiful, spreads are at all-time lows, refinances despite higher rates are getting done, and the maturity wall and office distress concerns haven’t gone away.

Lending Is “Roaring” Back

After more than two years of rate volatility and initial market caution, origination volume has surged. The Mortgage Bankers Association projects total commercial and multifamily mortgage originations to climb roughly 27% in 2026, topping $805 billion, with multifamily lending alone expected to exceed $399 billion. Refinancing is driving most of that volume, as borrowers who sat out the peak-uncertainty period return to a far more competitive and liquid lending field. We are beginning to see new acquisition and ground-up activity round out the market.

Capital Is Cheap Again (Relatively)

Life insurance companies, commercial mortgage-backed securities (CMBS) conduits, agencies, private credit funds, mortgage real estate investment trusts (REITs) and regional banks are all fighting for quality deals, and spreads have compressed accordingly. A tightening in credit corporate bonds and other fixed income investments has driven this compression farther.

Base rates haven’t moved much, but the improvement in borrower economics is coming from lender competition, not the Federal Open Market Committee (FOMC) or the Treasury markets. Spreads continue to tighten, but ultimately there is only so much room available without structural shifts in underlying indexes. Rates are unlikely to return to the all-time low coupons the market experienced during the pandemic, but today they are solidly in a competitive historical range.

CMBS Leads Recovery

Securitized lending has had its strongest run in years. First-quarter 2026 private-label CMBS issuance hit roughly $32.7 billion, the second-busiest Q1 since before the financial crisis, with single-asset, single-borrower deals making up nearly three-quarters of volume. This is important, as it does not necessarily translate to main street borrowers finding solutions within CMBS conduit executions that make sense. CMBS still presents challenges to the everyday non-institutional or experienced sponsor, and until there are ways to take the front-end risk out of a process that is so dependent on non-borrower or property-related variables, there will be continued hesitation for sponsors to go this route.

Be on the lookout for select players in the space who are working on focused securitization pools for multifamily only, with other assets likely to follow. Not all such programs are created equal, and most still run a traditional CMBS process subject to third-party B-buyer approval and with all the fits and starts that come with that process. Only a select group of players taking a crack at this program will succeed.

As banks, credit unions and life companies stay selective, CMBS does fill some of the gaps for larger transactions, and issuance is expected to stay elevated through year-end.

The Maturity Wall Is Still There

None of this liquidity erases the underlying math. An estimated $875 billion in commercial and multifamily mortgages come due in 2026, many originated when rates were lower and valuations higher. Better financing conditions help, but plenty of borrowers still face equity gaps that require fresh capital, modifications or partial paydowns.

The art of kicking the can down the road is still prevalent, with many lenders pushing borrowers out another 12 months before hard decisions will need to be made.

A Market of Haves and Have-Nots

Thriving:

• Multifamily — buoyed by for-sale housing affordability pressure, favored by agencies and life companies
• Industrial — logistics and e-commerce demand keep cash flows stable
• Retail — limited new supply has made it a consistently strong performer
• Outdoor Storage — surprisingly strong demand driving rents on large yard spaces

Struggling:

• Office — still the problem child, with elevated delinquencies and a stark split between trophy assets (highly financeable) and commodity buildings (very challenged)

What to Watch in the Second Half

1. Volume keeps climbing. Refinancing, recapitalizations and acquisition financing should sustain momentum absent any unforeseen economic shocks.
2. Private credit gains share. Flexible debt funds keep stepping in where banks won’t, especially for transitional and office assets.
3. More workouts. Expect a steady drumbeat of extensions, modifications, preferred equity and rescue capital.
4. Rates stay “higher for longer.” The 10-year Treasury is expected to hold in the low-to-mid 4% range, or approximately 150 basis points over inflation expectations, so further pricing relief will most likely continue to come from spread compression, not rate cuts.
5. Selectivity persists. Plentiful capital doesn’t mean easy capital; strong sponsors and durable cash flows still win the best terms.

Bottom Line

The market has yet to cooperate with anyone’s wish list or prognostication for lower rates in 2026. With most of the indexes higher mid-year compared to January, we turn our focus to getting deals done despite upward pressure on rates.

2026 looks less like a distress story and more like an opportunity story for the right assets. Liquidity has returned, CMBS is thriving, and refinancing is easier than it’s been in years. But the maturity wall and office-sector overhang mean discipline still matters. The winners in the second half will be the borrowers and lenders who capitalize on the improved environment without losing sight of where the risk still lives.