There's an old saying that water finds its level, and usually it means people gravitate toward the like-minded. But there's another way to take it from physics — that water will move about until pressure and force equalize. It adapts to changing conditions.

That's what's happening in the CRE debt market. There's a lot of ongoing change, with inflation up and then tapering off, the Federal Reserve pushing up its benchmark interest rate to slow the economy, and financing costs following. In response, the industry professionals are trying to suss out the distressed market even as some companies feel the pain. For example, New York City office building giant RXR Realty plans to halt some debt payments on older properties and surrender them to lenders.

However, as Hodes Weill & Associates notes in recent market commentary, debt adapts. "Following a resilient 2021 when lending activity and transactions rebounded from the shock of the pandemic, lenders and borrowers entered 2022 with an optimistic mindset which contributed to record transaction activity in the first half of the year," the firm says.