The Shifting Landscape – August 17, 2026
The lending environment is evolving even as transaction volume continues to rise
Commercial real estate lending volume is up year-over-year and with it investment sales volume, yet it’s instructive to take a more topographic look at the debt landscape. It has been shifting, and not at the incremental pace in which changes to a physical landscape may occur over decades, centuries or eons.
The Mortgage Bankers Association (MBA) reported earlier this month that commercial and multifamily mortgage loan originations were 16% higher in the second quarter of 2026 compared to a year earlier, and up 12% over Q1 levels. A new capital markets report from the team at Newmark generally corroborates that upward trajectory but also provides illumination on where the debt is coming from in addition to where it’s going.
A key lending source in the first half of 2026 was one that MBA doesn’t track: debt funds. Lending volume from these funds grew 54% year-over-year in H1, according to Newmark. Accordingly, the funds have taken market share from banks, although the latter remains the dominant capital source among non-agency lenders.
However, “bank” may be too broad a term. The picture becomes more nuanced when you look at it more closely. Small and regional banks’ share of CRE lending has risen from 60% in 2019 to 67% today.
Yet even the smaller domestic banks are reducing their construction loan exposure compared to prior peaks. Foreign banks, on the other hand, are stepping up, especially for data center projects.
Newmark reports that securitization volume has increased in recent months, spurred by spreads that are more attractive than those of corporate debt. H1 securitization volume was up 28% from the year-ago period—a slightly faster pace of growth than those of bank lending and CRE debt origination overall.
As readers of Connect CRE’s weekly Distressed Assets newsletter are likely aware, securitizations continue to be the lending source most prone to delinquencies, even as the percentage of delinquent CMBS decreased 35 basis points to 4.86% in Q2, according to MBA figures. On a month-to-month basis, the delinquency and special servicing rates for CMBS and other debt sources can be more volatile, and the Newmark report warns of storm clouds on the horizon.
Compared to its peak during the Global Financial Crisis, office distress as a share of total office transaction volume is down by about half. Yet compared to a year ago, office delinquencies are up 186 bps and since 2023, the sector has seen the steadiest and sharpest increases in delinquencies, followed by retail.
Currently, about $163 billion of outstanding securitized CRE debt is past its original maturity date. Performing office loan volume surpasses nonperforming debt, but by a lower ratio than in other property types: roughly 2:1 for office compared to better than 6:1 for multifamily. The continuing practice of loan extensions has also suppressed some of the pain, yet Newmark warns, “distress is building.”
Long-term, Newmark notes that financial markets currently price in two increases to the federal funds rate by the end of the year. (Those who expect the Federal Reserve to resume cutting rates may be waiting a while.) The firm’s own forecast calls for “a slow-growth, stubborn-inflation scenario as the most likely outcome over the next 12 months,” with the economy beset by tariff and energy shocks along with broader market slowdowns.
“Lenders across all capital sources have been on an expansion streak: the open question is demand,” according to Newmark. “Sustained elevated treasury yields threaten to reduce demand for leverage, and lenders have little room to compress spreads further.”