Rates check
The 2-year UST added 5bps to 4.24%, the 5-year rose 4bps to 4.43%, and the 10-year climbed 5bps to 4.74%. SOFR ticked up 2bps to 3.65%, while Prime held flat at 6.75%. For CRE borrowers, the upward drift in the belly and long end of the curve means all-in debt costs continue to grind higher. Floating-rate borrowers feel immediate pressure from SOFR’s creep, while fixed-rate executions are now pricing well north of 6.5% for even top-tier assets. Expect further cap rate expansion and thinner proceeds until the rate path stabilizes.
The big story
The 10-year Treasury is knocking on the door of 5%, a level not seen in nearly two decades, and the impact on commercial real estate is immediate and severe. Commercial Observer reports the 10-year hit 5.1%, directly inflating borrowing costs and cap rates across all sectors. Bisnow warns that lenders are slamming the brakes on dealmaking, with floating-rate debt costs spiking and refinancings stalling. The Fed’s recent quarter-point hike to a 3.75%–4.00% range, as noted by HousingWire, reinforces the higher-for-longer narrative. For sponsors, this means acquisitions that penciled six months ago no longer work, and maturing loans face a brutal refi environment. The bid-ask spread is widening, and transaction velocity is grinding to a halt until yields retreat or sellers capitulate on price.
Worth knowing
- Office CMBS delinquency surged to 12.2%, far exceeding the financial crisis peak, signaling the end of extend-and-pretend and the start of forced lender sales. Wolf Street
- Mortgage rates officially hit 7.5% for the first time since April 2024, directly raising debt costs for acquisitions and refinancings across all CRE asset classes. Mortgage News Daily
- Realterm and Starwood Property Trust co-originated a record $672M IOS financing, signaling deep liquidity and strong lender appetite for niche industrial product. Connect CRE
- Soaring yields above 5% are stalling REIT M&A, with few portfolio transactions expected until rates stabilize. Bisnow
- Scale Lending provided a $68M construction loan for a 200-unit suburban multifamily project in Rahway, NJ, showing active debt availability with tighter terms. Commercial Observer
- A hot August CPI reading sets the stage for another potential Fed hike next week, threatening to push swap rates and CRE debt costs even higher. Mortgage Professional America
One number
12.2% — The office CMBS delinquency rate has re-spiked to a level far worse than the financial crisis peak, signaling the end of extend-and-pretend and the beginning of forced lender sales that will reset property values.