With the commercial real estate market facing heightened uncertainty, members of Colliers Capital Markets and Colliers Mortgage recently sat down to unpack how investors and lenders are navigating today’s shifting capital stack.
One of the first topics was how investors are reacting to 10-year Treasury Notes with yields hovering at 4%. According to the panel, many are leaning toward shorter loan terms, such as 5-year notes yielding around 3.60%, given the shape of the yield curve. So far this year, the curve has steepened and moved lower, creating a roughly 50-basis-point advantage for shorter maturities. As a result, borrowers are increasingly opting for 3-, 5-, and 7-year fixed-rate loans over 10-year terms, even though the 10-year yield remains only a few basis points above 4%. In short-term lending, banks continue to rely on SOFR as the benchmark, especially for construction financing.
The lending backdrop is also shifting. Colliers noted that commercial mortgage loans are offering more favorable spreads than corporate debt while also diversifying investor portfolios. Competition is intense—not just among lenders for high-quality property assets and borrowers, but also among borrowers themselves to secure lender attention. Banks remain cautious but are selectively originating construction loans, with a strong preference for multifamily, retail, and industrial properties due to consistent market demand and their ability to generate net operating income.
Credit and underwriting standards have stayed relatively balanced, but equity investors are watching recent revaluations in commercial real estate closely. With property values adjusting downward, new opportunities are opening up. Both owners and investors, however, will need long-term stability—at least five years of resources and steady conditions—to weather the current environment. Returns, Colliers said, are now more likely to come from property cash flow rather than future cap rate compression. Institutional equity investors may secure better risk-adjusted credit terms over time, but those changes will take shape gradually.
The discussion also touched on tax policy. Most CRE-related provisions from the 2017 Tax Cuts and Jobs Act survived this year’s legislation, which was reassuring for investors. Still, the panel cautioned that those relying on negative leverage will need to take a more disciplined approach to ensure long-term sustainability.
The looming challenge is the tide of loan maturities. Colliers estimates that about $1.5 trillion in commercial mortgage loans will mature by the end of 2026, with another $800 billion coming due by 2028. While many loans have already been extended by 12 to 24 months to ease short-term stress, the bulk of maturities will begin building rapidly in early 2026. Rising default risks and distressed debt are expected to follow, likely forcing more investment sales, refinancings, recapitalizations, structured transactions, and joint venture deals as investors and lenders seek creative ways to acquire and reposition properties.
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