Rates check
The 10-year UST added 5 bps to 4.74%, while the 2-year and 5-year rose 5 bps and 4 bps to 4.24% and 4.43%, respectively. SOFR ticked up 2 bps to 3.65%, and Prime held flat at 6.75%. For CRE borrowers, the upward drift in the belly and long end keeps all-in debt costs elevated. Fixed-rate permanent loans are pricing deep into the 6s and 7s, compressing levered returns and forcing sponsors to bring more equity to the table. The 10-year’s grind toward 5% — a level it tested in recent weeks per Mortgage Professional America — is the single biggest headwind for deal underwriting right now. Expect wider spreads and slower velocity until the rate path stabilizes.
The big story
The office CMBS delinquency rate has re-spiked to 12.2%, far exceeding the financial crisis peak, according to Wolf Street. This isn’t just a headline — it’s the sound of the extend-and-pretend dam breaking. Lenders are losing patience with over-levered, under-occupied assets, and special servicers are moving toward forced sales and foreclosures. For brokers and sponsors, this marks a critical inflection point: distressed-debt plays are materializing, but the bid-ask spread remains wide. Valuations will reset lower as these assets trade, creating acquisition opportunities for well-capitalized buyers — but only if they can stomach basis risk and navigate complex workouts. The message is clear: the era of kicking the can is over.
Worth knowing
- Mortgage rates hit 7.58%, a critical signal that CRE debt costs are compressing leverage and slowing transaction velocity across all asset classes.
- The Fed hiked rates for the first time since 2023, moving the benchmark to 3.75%–4.00%. Analysts see more tightening ahead, directly pressuring floating-rate debt and swap costs.
- Realterm and Starwood Property Trust co-originated a record $672M IOS financing, signaling deep liquidity and strong lender appetite for niche industrial product.
- BridgeCity lent $84M on a Midtown East office-to-resi conversion, proving lenders still back well-executed repositionings — model conversion costs and entitlements carefully.
- Soaring 10-year yields above 5% are stalling REIT M&A, so anticipate few portfolio transactions until rates stabilize.
- Lenders warn CRE’s ‘day of reckoning’ is close as the 10-year at 5.3% slams the brakes on dealmaking, with sponsors facing a stall in refis and acquisitions.
One number
12.2% — The office CMBS delinquency rate, now far worse than the financial crisis peak, signaling the end of extend-and-pretend and the start of forced asset sales.