The Retrading Trade – Oct. 12, 2026

Investors are starting to renegotiate deals that were set in place in the lower-rate environment of six to 12 months ago

Commercial/multifamily mortgage debt outstanding reached $5.1 trillion as of June 30, 2026, according to the Mortgage Bankers Association. The second quarter added nearly $43 billion to that total. But amid the high volume of loans being granted, hesitancy is starting to creep into the picture. 

Not on the part of lenders. It’s borrowers who have second thoughts. 

“In commercial real estate, a lot can happen in six to 12 months,” the Wall Street Journal reported. “That’s the time it frequently takes between when a buyer signs a contract and when the sale is completed. With interest rates suddenly soaring, that’s more than enough time for financing costs to rise—sometimes by a lot.” 

With borrowing costs now higher compared to early 2026, investors have begun renegotiating their deals, reported the WSJ. They’re demanding price cuts or other concessions, and threatening to walk away unless deal terms are improved. 

Although it may be tempting to link this rise in retrading to the Federal Reserve’s 25-point increase in the federal funds rate last month, the WSJ traces it to the rising bond yields the market saw in late summer. It has intensified, though, since the Fed voted to increase the FFR and signaled that more rate hikes could follow this year. 

“Rates went up, what, just a few days ago and I’m already getting calls where they’re talking retrade,” Jeff Powers, a Cushman & Wakefield managing director, told the WSJ after the Fed’s decision. 

Citing an example of a leading multifamily investor who demanded a price cut to offset a six-tenths of a percentage point increase in borrowing costs, the WSJ reported that the retrades are an early sign of broader market distress weighing on property values, slowing development and making maturing loans harder to refinance.  

“We are working harder to close deals now than we ever have before,” Bobby Werhane, a managing director of Marcus & Millichap’s IPA Capital Markets division, told the WSJ. 

The malaise over borrowing costs is casting a cloud over what had been a brightening CRE investment landscape, according to the WSJ. Even the office sector, largely written off in the first few years post-pandemic, was coming back into favor with investors. “Now, the sudden surge in interest rates is derailing that period of progress,” the WSJ reported. 

In the same article, citing Trepp data, the WSJ reported that the special servicing rate among CMBS has reached its highest level since 2013, when the market for securitized loans was still dealing with loans made before the Global Financial Crisis. It’s debatable whether that phenomenon can be correlated with the market forces driving the recent movement toward retrades, though. The gap between today’s rates and borrowing costs at the time the CMBS loans were originated has been wide for the past few years, certainly since the series of rate hikes under Fed Chair Jerome Powell ushered in the era of higher-for-longer. 

Although higher rates may pose a hurdle for borrowers, the availability of capital does not–a key distinction between the post-GFC period and 2026. “Lenders and investment funds still have ample capital to put to work,” reported the WSJ. “Debt and equity investors have raised money faster than the market has produced deals, intensifying competition among lenders for the strongest projects.” 

Now, whether the cost of capital is to the borrower’s liking is another matter.