The coming year looks more promising for commercial real estate, as the market has been loosening up since 2024.
“They said stay alive in 25 and stay in the mix until 26,” Xander Snyder, senior commercial real estate economist at title insurance and settlement service firm First American, tells GlobeSt.com, as 2025 has been a period of transition.
The balance is changing the market dynamics through five forces, according to the latest report from First American: pricing stabilization, growing sales activity, refinancing and lending activity rebounding, distress nearing a peak and the re-engagement of lenders.
Property prices first stabilized and then posted modest gains above 2024 levels, a “meaningful sign that purchase demand is returning and that buyers are increasingly willing to transact at prevailing prices,” the report said.
Transaction volumes have also gradually increased over 2024 levels in both dollar and square footage measures, approaching the five-year pre-pandemic average.
“The 2025 volume in space terms is higher than in 2024, but the increase is less substantial in space terms than in dollar terms,” Snyder says.
While it might seem that valuations must have increased, the picture is more complicated. Transactions include both previously existing and newly built assets. Building costs have increased; for many types of CRE, an existing building can be cheaper than new construction.
CRE refinancing activity has hit a turning point after peaking in 2021 and falling sharply from late 2022 through early 2024. The low was $55 billion in 2024 Q1 but jumped to $114 billion in 2025 Q3. Refinancing has returned to levels last seen in December 2019 through early 2022.
“We’re getting to the point that a lot of loans originated in 21 or 22 are maturing. Sellers or owners don’t have as many options,” says Snyder.
“Sellers or owners don’t have as many options. From the perspective of market activity, the refinancing volume matters.”
It ties into the increase of distress deals that have been building and are now expected to peak in 2026.
“It’s a combination of the distress being gradually worked out,” says Snyder.
“But for certain periods in the last years or so, owners have taken opportunistic advantage where rates dipped here and there, understanding that we’re going to be in a time of higher rates for longer.”
CRE loan distress is nearing a high-water mark using CMBS delinquency rates as proxies, according to Snyder. Although they are only 15% to 20% of all CRE loans and not statistically representative, the public nature of the information is “a little bit more immediate.” Lenders aren’t able to restructure a loan, invoking the extend-and-pretend strategy that can obfuscate conditions. Also, loans are likely a lower bound on distress, given that many properties might still meet debt service but have a declining NOI.
As distress clears, more capital will be available, and lenders will increasingly re-engage with improving conditions, driving origination volume higher. The combination of factors likely means that a new CRE business cycle will start in 2026.
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