Commercial real estate financing conditions are beginning 2026 in a fragmented state, with borrowing costs moving in opposite directions depending on loan structure, according to NAIOP's First Quarter 2026 Debt Market Survey based on Altus Group data.
While Treasury yields rose modestly during the quarter, pushing fixed-rate borrowing costs slightly higher, floating-rate borrowers saw meaningful relief as the Secured Overnight Financing Rate (SOFR) continued to decline.
The divergence comes amid broader policy uncertainty. The Federal Reserve has held rates steady through its first few meetings of 2026, while rising energy prices tied to geopolitical tensions in the Middle East have complicated the inflation outlook and clouded expectations for future rate cuts.
According to NAIOP, fixed-rate all-in borrowing costs were generally flat to slightly higher in the first quarter as Treasury yields edged up. At the same time, floating-rate all-in costs declined across property types as SOFR moved lower, providing borrowers with near-term financing relief even as longer-term capital costs firmed. The result is a structurally split market.
Despite this volatility, lending activity showed signs of recovery. Quote volume rebounded in the first quarter following sequential declines through 2025, although it remains below year-ago levels. The product mix remained balanced between fixed- and floating-rate structures, with floating-rate senior debt continuing to represent the most frequently quoted product.
One of the most notable developments in the survey was in credit spreads, particularly in the office sector. Office spreads compressed across nearly all product types and leverage levels, with a narrowing gap between trophy and non-trophy assets.
Multifamily and industrial spreads, on the other hand, remain tight, while retail spreads widened after a prior period of compression.
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