But clarity on the trade front will be needed to spur greater progress, says lending CEO
Uncertainty about the ongoing tariff war between the US and global trading partners is continuing to weigh down the national housing market, with no sign yet that an end is in sight – or where interest rates are heading between now and the end of the year.
That volatility is spilling over into the commercial mortgage space, where borrowers and lenders alike are seeking clarity on the lending outlook for current and future construction and renovation projects.
Recent years have seen banks adopt an increasingly cautious approach to commercial lending across the US because of a bumpy and unpredictable economic landscape, a trend that’s rumbled into 2025 with the tariff turmoil.
For other lenders in the commercial space, that’s driving fresh opportunity. “We continue to see certain cases where banks are trying to deleverage and reduce exposure to commercial real estate,” Greg Friedman (pictured top), managing principal and chief executive officer at Peachtree Group, told Mortgage Professional America.
“It’s creating an environment where banks, traditional lenders to commercial real estate, are unwilling to lend at the same levels that they once did. That continues to create a huge opportunity for us on the private credit side, where we’re doing a lot of direct lending beyond even buying loans from banks and things like that.”
Those opportunities include refinances where projects have recently completed construction or renovations, while recapitalizations and acquisition financing amid a wall of debt maturities are also on the rise.
Is ‘extend and pretend’ trend on the wane?
On the equity side, meanwhile, private credit lenders are moving in to provide structure where banks and other lenders are less willing to step up to the plate.
About $1 trillion worth of loans are set to mature over the next 12 months in the commercial space – and rising interest rates and a rocky environment have seen a growing trend of “extend and pretend” strategies, where lenders stretch out the loan maturity date to avoid having to recognize an immediate loss on a distressed property.
But Friedman said a growing number of banks and other lenders are now unwilling to continue extending, forcing borrowers to sell assets or even refinance and open the door for other lenders on the acquisition financing side.
Expectations for Federal Reserve interest rate cuts have dialed down in recent weeks thanks to new economic data showing a robust US labor market and inflation slowly gathering pace.
Odds of a July cut have plunged to nearly zero, while FedWatch data shows markets are sharply lowering the chances for a reduction in September.
Calmer economic outlook needed to drive stronger commercial market
Until more clarity emerges on a potential end to the tariff chaos, Friedman said the commercial real estate outlook is likely to remain cloudy.
“We need a stable economy for businesses to thrive and for everything to really outperform our outlook,” he said. “We need to be in a very stable environment at a minimum.
“I think a lot of what we see over the next six to 12 months is going to be dependent on having a more stable trade policy. That’s going to lead to a more stable interest rate environment – which will be positive, because rates have obviously continued to stay higher for longer.”
The Fed’s interest rate policy has drawn sharp criticism from the Trump administration, with the president denying this week that he planned to try to fire chair Jerome Powell despite reports suggesting he came close to trying.
Meanwhile, the trade war unexpectedly ramped up last week with Trump’s revelation that he was planning new 35% tariffs on Canadian imports to the US by August 1, and reportedly considering further levies on other countries.
President Trump announced a sweeping 35% tariff on Canadian imports, escalating a trade dispute between the two allies. https://t.co/AcD57Ik1Pz
— Mortgage Professional America Magazine (@MPAMagazineUS) July 14, 2025
Friedman said the weeks ahead would be pivotal for the economic outlook, and prospects for the commercial mortgage market. “In order to have a thriving economy and have the cost of capital come down, we need to have that stability within our policies and within government,” he said.
“And we need to figure out some of the trade policies relatively quickly. That’s a huge headwind to the stability of the economy. I think the next 30 to 60 days are going to be super important.”
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