Real Estate Broker Match – Market Pulse
Real Estate, Interest Rates, Deal Flow
February 2026
Market Overview
Treasury Rates – 6-Month Change (July 2025 → Feb 2026)
| Rate | 6 Months Ago | Now (Feb 1, 2026) | Change |
| SOFR | 4.36% | 3.64% | -72 bps |
| 2-year Treasury | 3.86% | 3.53% | -33 bps |
| 10-year Treasury | 4.34% | 4.26% | -8 bps |
| 30-year Treasury | 4.86% | 4.89% | +3 bps |
Key Takeaway: Short-Term Rates Fell, Long-Term Rates Stayed Sticky
Short-term borrowing costs fell meaningfully (SOFR -72 bps), while long-term rates stayed roughly flat.
Longer-term yields remained relatively firm, reflecting a higher term premium amid policy uncertainty and global bond volatility.
Why this matters: Long-term fixed borrowing costs can stay elevated even if the Fed cuts, which matters for refinancing and valuation assumptions. Don’t assume Fed rate cuts will automatically lower 10 or 30-year borrowing costs.
Capital Is Back – But Only for Clean Deals
Lending activity is improving – especially for stabilized, cash-flowing properties. By several industry measures, CRE loan originations and refinancing activity are running ahead of last year. But underwriting standards remain materially tighter than the 2021 era.
What lenders now require:
- Cash flow over appreciation: “Generic value-add” is harder to finance unless the plan is well-capitalized and execution risk is clearly mitigated. Lenders want stable, predictable cash flow that can withstand operational friction.
- Operational excellence matters more than ever: Leasing velocity, renewals, expense control, insurance/tax management, and disciplined CapEx planning. Lenders require proof that you can execute.
- Sponsor quality: Equity partners are concentrating capital with fewer, proven operators. Track record outweighs projected future performance.
Warning sign: PIK structures (payment-in-kind – where borrowers defer cash payments) are showing up more often in certain private credit deals, typically a sign borrowers are stretched.
Bottom line: Capital is available, but access is selective.
What this means: Most improvement is in refinancing and lender competition for stabilized assets. Transitional deals still require more equity and a tighter structure.
Buyer Demand Is Bifurcated – Premium Assets Clear, Average Assets Struggle
Capital is chasing:
- Data centers: Structural undersupply of power + AI demand. Sites with high-capacity electrical infrastructure see aggressive bidding.
- Modern industrial: Starts down ~60% from 2022. Supply squeeze coming. Buyers want power, fiber, port proximity, and reshoring exposure.
- Tight-market multifamily: Midwest and lower-development markets showing resilience as oversupply fades.
- High-quality retail: Grocery-anchored and suburban retail benefit from limited new supply and stable tenant demand.
Capital is avoiding:
- Non-prime office: Older Class B/C, amenity-light space is struggling as tenants consolidate into newer, amenity-rich properties. Can’t deliver “workplace experience” = economic obsolescence.
- Oversupplied Sun Belt multifamily: Florida and the Gulf Coast are still absorbing 2023-2025 construction. Concessions are widespread, and rent growth stalled.
- Operating stress: Insurance and property taxes are compressing net income.
- Capital structure stress: Aggressive bridge financing left many deals with entry pricing that no longer pencils at today’s rents and debt costs.
What defines “edge” in 2026: Power capacity, infrastructure readiness, operational track record, and ability to navigate rising non-discretionary costs. Assets lacking these attributes often see a sharply smaller buyer and lender pool.
What We’re Hearing from Top Brokers
The Supply Wave Is Fading – But Absorption Takes Time
Construction starts have collapsed. Multifamily and industrial development starts are down ~60% from 2022 peaks. Limited new supply in 2026-2027 should tighten fundamentals.
The nuance: Absorption varies wildly. Midwest multifamily is already resilient. The Sun Belt (especially the Gulf Coast) is still working through heavy development. In oversupplied pockets, absorption (how quickly vacant units get filled) is accelerating via lender-driven sales and receiverships (lender takes control to stabilize/sell when the sponsor can’t) as short-term bridge loans mature before rents stabilize.
Industrial & Data Centers: Power Is the New Location
Power availability is increasingly a gating factor. AI demand vastly outpaces infrastructure improvements. While grid spending surges, actual capacity lags – creating a meaningful advantage for assets with existing high-capacity electrical infrastructure.
The risk: Older facilities lacking power specs for AI processing or high-density operations face obsolescence. Can’t retrofit = the buyer pool narrows sharply.
Deals Are Clearing Again – Pricing Has Adjusted
Transaction volumes are up ~20% YoY. All-in borrowing costs are ~40% lower than 2023 peaks, making positive leverage possible again in select sectors (property yield exceeds borrowing cost).
What’s driving velocity:
- Rising cap rates + falling borrowing costs = returns are at more attractive levels
- Institutional capital is “quietly flowing back” as repricing stabilizes
- More forced outcomes are appearing (lender-driven sales, receiverships, recapitalizations), which accelerates price discovery
Bid-ask gap remains wide, especially in the overbuilt Sun Belt and in lower-tier properties. Sellers still haven’t priced in the supply wave and rising operating costs. The likely catalysts are forced sales and loan resolutions that reset comps and pull pricing back to reality.
The Expense Shock Reality
Rising insurance and property taxes are pressuring deal viability – in some cases, more than interest rates.
The problem:
- Insurance inflation is materially reducing net income
- Property tax increases are hitting simultaneously
- These costs are non-discretionary – often difficult to offset quickly through operations alone
- Credit committees are rejecting deals where sponsors haven’t factored this in
Why this matters more than rate cuts: For the past decade, cheap debt and rapid appreciation masked operational risks. The “set it and forget it” model has stopped working for many owners in today’s cost and financing regime. Rising operating costs directly eat into net income, forcing investors to rethink buy boxes and exit strategies.
What lenders are doing: Underwriting has shifted from pro forma appreciation to disciplined cash flow analysis – lenders value deals based on current cash flow and conservative growth assumptions, not pro forma appreciation. Focus is on real operating data and expense control to protect margins.
The bottom line: Rate cuts won’t solve every capital stack or operating shortfall. Success in this cycle requires relentless focus on building operations and expense control. Owners who can’t demonstrate operational excellence often face a narrower lender and buyer pool, even in otherwise healthy sectors.
Real impact: If insurance rises by $150K and taxes rise by $200K annually, that’s $350K less in net income, which translates to roughly $5.8M less in property value at a 6% cap rate.
Capital Markets Intelligence
What Lenders Are Doing
- Banks: Still tight, focused on refinancing existing loans, picky on property type
- Agencies: Reliable capital for multifamily
- Life companies: Top-quality assets and sponsors only
- Debt funds: Active and fast, but watch PIK structures – a stress signal
The 2026 Maturity Wall – How Loans Are Being Resolved
2026 maturities total ~$663B (down from $957B in 2025). CMBS and CLO maturities account for ~$135B.
Three outcomes emerging:
- Short-term refinancing: Many loans are being extended or refinanced into new 1–3 year debt (bridge loans) rather than fully terming out. This is fueling CLO (pooled loan securities) issuance – but this often delays resolution rather than solving the underlying issue.
- Forced sales and receiverships: Gulf Coast and oversupplied Sun Belt markets are seeing lender-driven sales as extension-heavy workouts reach their limits. In some cases, sponsors are impaired or diluted as lenders reset value and basis.
- Refinancing momentum: Improving liquidity for quality assets. An uptick in traditional mortgage issuance and tighter spreads signal the refinancing window is slowly reopening for stable cash flow properties.
What this means: More loans are being extended, which delays forced selling – but increases refinancing risk if fundamentals don’t improve.
Early Warning Signals
- Loan workout transfers: Large office portfolios and regional malls are being transferred to workout specialists (moved from regular servicing due to default risk) indicating systemic stress
- Expense shocks: Insurance inflation and property taxes are breaking deals even when rates are steady
- Lack of operating data: Operators without real-time data or operational excellence fail as cheap debt that masked deficiencies is gone
- Sun Belt supply pressure: Heavy multifamily development creates near-term rent pressure, signaling potential debt coverage issues (when cash flow can’t cover debt payments, triggering lender control) for over-leveraged properties
Housing & Rents
Housing Prices
Affordability is the choke point. Regional dispersion remains wide – several Midwest/Northeast markets are holding up better, while parts of the Sun Belt remain softer. Mortgage lock-in (owners sitting on sub-5% mortgages) continues to restrict resale inventory.
Rents
- Multifamily: Flat to modestly down rents as the supply wave works through
- Single-family rentals: Holding up better, slightly positive year-over-year
- Office: Gap widening – prime space clears, non-prime struggles
- Retail: Healthier than expected, especially suburban live-work-play
Supply Outlook
Development has dropped sharply from the 2022 peak. Logistics starts are down ~60%, and multifamily is also down meaningfully. The market can shift from oversupply to undersupply faster than expected.
What’s Working / What’s Not
Winners |
Losers |
| Data Centers & Power-Ready Sites
Demand growth is constrained by grid capacity. Power-ready sites command premium pricing and faster liquidity. |
Non-Prime Office (Class B/C)
Tenants consolidate into newer, amenity-rich space. Refinancing and liquidity are harder without a clear repositioning plan. |
| Modern Industrial
Starts down 60% from 2022. Supply collapse sets up rent growth. Reshoring tailwinds continue. |
Oversupplied Multifamily
Southeast markets with heavy 2023-2025 deliveries are still facing concessions and rent growth pressure. |
| Student Housing
Counter-cyclical strength. Enrollment-driven demand is more resilient than traditional multifamily. |
Discretionary Retail
Middle-income retailers are reporting slumping sales as consumer spending shifts. |
| Grocery-Anchored Retail
Limited new construction, low availability, resilient rent growth in essential retail. |
Older Data Centers
Assets lacking power specs for AI face reduced buyer interest. Retrofit economics often don’t work. |
| Build-to-Rent & Senior Housing
Single-family rental demand remains strong. Aging demographics support healthcare real estate. |
Generic Value-Add Plays
Strategies relying on market appreciation without operational improvements or strong execution underperform. |
| Luxury Hospitality (Select Markets)
High-end brands are seeing growth in Las Vegas and Miami – design-led luxury living is attracting capital. |
Tight Markets (Midwest Multifamily)
Lower-development markets are showing resilience as supply is absorbed – now entering the winners category. |
Office: Survival Strategies
Lower-tier properties and traditional suburban office parks face economic obsolescence (the building can’t attract tenants at rents that justify required operating and capital costs). Three strategies emerging:
- Residential conversions: The primary strategy for obsolete suburban office properties is to enhance long-term value by repurposing.
- Mixed-use repositioning: Successful developers are reinventing office parks into vibrant “town centers” integrating housing and retail. (Example: Bishop Ranch in San Ramon, CA – has transformed an obsolete suburban office park into a mixed-use town center. Key lesson: Add housing/retail to create daily foot traffic and justify reinvestment.)
- Flight-to-quality for office use: Create amenity-rich, “enriching” spaces prioritizing workplace experience over mere functionality. Attract corporate occupiers who demand top-tier space.
The shift: Landlords need stronger operating discipline and data-driven reporting to compete effectively. Tenant experience is increasingly the differentiator, not just square footage.
When Selling Makes Sense
Sell If:
- Loan maturity within 12–18 months and refinancing likely requires a paydown (proceeds gap)
- Asset needs major CapEx to stay competitive and you’re not set up for it
- You’re a passive/out-of-market owner in a market requiring hands-on management
- You own a bid-worthy asset (data centers, strong industrial) where buyers compete aggressively
- You’re in oversupplied Sun Belt markets where heavy development pressures rents and you lack an operational edge
Hold If:
- Long-dated, low-cost debt locked in
- Clear upside exists and the new supply pipeline is shrinking
- Core asset in a core location and you can be patient
- Submarket showing the bottom is in (unsolicited bids, rising velocity)
- You have operational excellence to navigate expense shocks
The “Inject Equity vs. Sell” Decision
Injecting capital is rational only if the asset fits a hold-and-improve plan where you can realistically create value through operations – not just market appreciation.
When to hold/inject:
- Quality assets with structural demand (data centers, high-quality retail)
- Strong operators who can demonstrate operational excellence
- Markets where supply discipline creates clear upside
When to sell now:
- Relying on outdated appreciation assumptions
- Overbuilt Sun Belt markets with heavy development pressuring rents
- Operators who used cheap debt to hide poor asset management
- Generic value-add without a unique investment thesis
Critical Risks:
- Waiting without a plan: Increases downside risk – especially if the extension doesn’t come with a clear deleveraging path
- Assuming lending loosens for everyone: Access is selective – sponsor quality and asset quality matter
- Not stress-testing assumptions: Optimistic projections without rigorous downside analysis increase risk. Test assumptions against conservative scenarios before committing capital
- Not building a challenge network: Surround yourself with trusted critics who provide honest feedback. “Pro forma optimism” kills deals – pre-mortems (discussing how a deal could fail) build resilience.
If You Have a Loan Maturity in the Next 12–18 Months:
- Request trailing 12-month operating statement + current rent roll
- Confirm insurance renewal terms and property tax reassessment risk
- Ask the lender what debt coverage ratio, debt yield, or paydown they’ll require to refinance
- Get a broker opinion of value early (not at maturity) to avoid forced timing
Three High-Impact Actions for Owners Holding Through 2026
If you’re holding assets, these actions protect value in 2026:
- Shift to execution-focused management: High-quality property management and rigorous expense control (labor, insurance, taxes) increasingly determine real estate outcomes and protect margins.
- Leverage technology and data: Use analytics tools for lease comparables, expense tracking, automated lender reporting, and tenant renewal risk assessment.
- Prioritize tenant experience: Properties that offer superior amenities and quality command higher rents and tenant retention. Competitive differentiation matters more than meeting baseline standards.
What We’re Watching Next
Fed Path
- Current: Fed funds 3.50%–3.75%
- Market pricing: ~2 more 25 bps cuts by December
- Key dates: March 17-18 FOMC; April 28-29 FOMC
Jobs & Inflation
- Feb 6: Jobs report
- Feb 11: CPI
- Feb 20: PCE inflation (Fed’s preferred measure)
What Would Change the View
- Wholesale inflation trends: Impact of credit card rate caps on consumer spending
- Labor market equilibrium: How AI affects employment – if significantly negative, it may force an aggressive cutting cycle
- Multifamily supply absorption: Massive supply wave hitting Sun Belt – timing of absorption is critical for Fed’s housing-related inflation view
Key Terms and Acronyms:
- Net Operating Income (NOI): Cash flow after operating expenses, before debt service
- Cap rate: NOI ÷ property price (rate of return)
- SOFR: Benchmark short-term rate used in many floating-rate loans
- Bridge loan: Short-term (1-3 year), usually floating-rate financing
- Term premium: Extra yield that investors demand to hold long-term bonds
- Commercial Mortgage-Backed Securities (CMBS) / Collateralized Loan Obligation (CLO): Securitized pools of commercial real estate loans
- Basis / Cost basis: What you paid for the property (your entry price)
- Spreads: The premium lenders charge above base rates
- Pro forma: Projected future performance (vs. actual current performance)
- CRE: Commercial Real Estate
Disclaimer
For informational purposes only. This newsletter is intended solely for the use of the recipient and may not be reproduced without prior written consent. The content provided herein does not constitute investment, legal, financial, or tax advice. Market conditions are subject to change without notice, and third-party data is believed to be reliable but not guaranteed. Real estate investments involve substantial risk, including potential loss of principal. Past performance is not indicative of future results. Real Estate Broker Match is owned by Real Estate Foundation, Inc.
