Commercial real estate investors are increasingly accepting negative leverage in some of the market's most sought-after property sectors, a sign that many buyers remain willing to sacrifice near-term returns in anticipation of stronger property income and lower financing costs down the road.
According to a new analysis from CRED iQ, the average cap rate on $26.1 billion of newly originated CRE loans securitized in 2026 now sits almost exactly in line with the average mortgage coupon. The finding suggests many borrowers are entering deals with little to no positive leverage, a sharp departure from the traditional real estate investment model in which property yields exceed borrowing costs.
The trend is most pronounced in sectors that continue to attract strong investor demand.
CRED iQ found that manufactured housing, multifamily, industrial, self-storage and mixed-use properties are all being financed at mortgage rates that exceed their cap rates. Manufactured housing posted the largest negative leverage spread, with a cap rate of 5.41% and an average coupon of 6.27%, while multifamily assets carried a 5.45% cap rate against a 5.64% borrowing cost. Industrial properties posted a 6.03% cap rate and a 6.33% coupon.
"Every favored income sector is now borrowing through its cap rate," the report said.
The willingness to accept negative leverage reflects investors' expectations that future rent growth or lower refinancing costs will ultimately improve returns. Rather than relying on current cash flow, many sponsors appear to be underwriting future growth in net operating income to justify acquisitions.
Meanwhile, sectors that have faced greater investor scrutiny continue to offer positive leverage.
Hospitality properties posted the highest cap rates among newly originated CMBS collateral at 8.02%, compared with an average coupon of 6.78%. Office assets traded at a 7.45% cap rate and a 6.5% coupon, while retail properties generated a smaller positive spread at a 6.81% cap rate and a 6.61% coupon.
The disparity illustrates how investors continue to demand higher yields from property types perceived as carrying greater risk.
The report also highlighted the highly selective nature of today's office lending environment. Office loans securitized in 2026 carried a weighted average debt yield of 13.8% and a loan-to-value ratio of just 55.4%, the most conservative underwriting profile among major property sectors.
"Only well-leased, low-leverage office is getting financed; everything else remains shut out," CRED iQ said.
Another notable trend is the growing use of interest-only debt. According to the report, 56% of newly issued loan balances feature full-term interest-only structures, allowing borrowers to maximize cash flow at a time when leverage spreads remain thin.
The analysis also suggests that debt markets, rather than investor optimism, are now setting the floor for property valuations. CRED iQ said multifamily and industrial cap rates have limited room for further compression unless borrowing costs decline, effectively tying future valuation gains to interest-rate movements.
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