Commercial Real Estate Lending Reflects a Market in Transition in Q3 2026: CBRE

Commercial real estate lending activity in the third quarter reflected a market in transition, as interest rates moved higher in September, according to the CBRE Lending Momentum Index.

The CBRE Lending Momentum Index tracks the pace of CBRE-originated commercial loan closings in the U.S. over a 36-month period; higher readings signal stronger lending momentum and improved sentiment. The Index stood at 0.7 at the end of Q3 2026, unchanged from a year ago but down from 1.0 at the end of Q2 2026.

“The third quarter was a tale of two markets. July and August largely reflected business as usual, with ample liquidity and constructive lending conditions. That changed in September as Treasury yields moved sharply higher and the Fed raised rates, increasing borrowing costs and prompting both buyers and lenders to reassess pricing assumptions and exit cap rates,” said James Millon, President & Co-Head of Capital Markets, U.S. & Canada, for CBRE.

“The result was a repricing across both debt and equity markets for acquisitions, refinancings and recapitalizations, as investors weighed a wider range of potential outcomes amid continued inflation concerns and geopolitical uncertainty. Despite that volatility, capital remained available and credit continues to attract investor demand because of its yield and income characteristics. That ongoing appetite for credit should support capital availability even as markets work through near-term uncertainty.”

Commercial mortgage loan spreads narrowed by 23 basis points (bps) year-over-year to an average of 197 bps in Q3 2026, while multifamily loan spreads tightened by 7 bps year-over-year to 167 bps. These figures are based on fixed-rate, five-to-10-year permanent loans. Commercial loan-to-value ratios averaged 64.3% in Q3 2026, down from 66.9% a year ago, while multifamily LTV ratios increased to 66.3% from 64.9%.

Alternative lenders led CBRE's non-agency loan closings in Q3 2026, accounting for 48% of total volume, up from 37% a year earlier. Banks held the second-largest share at 26%, down from 31% a year earlier. Life companies increased their share of non-agency loan volume to 20% from 16%, while commercial mortgage-backed securities (CMBS) lenders' share declined to 6% from 17% over the same period.

Key underwriting metrics showed mixed movement year-over-year but stayed within a healthy range in Q3 2026. The debt service coverage ratio eased to 1.32 from 1.34 a year ago, while debt yield held steady at 9.5%. Average mortgage interest rates edged up to 6.0% from 5.8% a year ago, while capitalization rates dipped to 6.0% from 6.1%. The share of loans with partial or full interest-only terms rose to 82.4% from 80.3% a year ago.