A lot of financing and refinancing strategies among CRE owners have become waiting games. Hold until interest rates eventually go down — putting off loan maturities or new purchases as much as possible — until they can get themselves out of trouble.

One of the types of tools for floating rate interest loans have been interest rate caps, which offer some protection against the increase of interest rates when some benchmark like SOFR crosses a threshold. At least until the rate cap fees started jumping in 2020 and the costs started to crush transactions by May. Things continued to get worse by October. And then … they kept getting worse. In 2023, the rate cap cost increases were crushing even more CRE transactions.

Concerns eventually started to ease as inflation seemed to be coming under control and there was a growing thought that the Federal Reserve would start cutting rates. Three times during 2024. Granted, that three cuts of probably 25 basis points each would be less than now, but the total 75-basis point amount wouldn't be terribly compelling.