Senior economist tells brokers what will drive more deals in 2026
If 2025 was a yellow traffic light in the commercial real estate (CRE) space, forecasts expect green lights in the sector in 2026.
Some of the challenges seen in the CRE space in the last year have been several years in the making. Loans coming due that were issued during the pandemic required either restructuring or extension.
There were other headwinds in commercial projects, with some delayed or falling through completely. Other existing projects, like large condominium communities, suffered from delayed maintenance.
As the industry worked through those issues in 2025, it looked ahead to 2026, when it expects to emerge from those headwinds stronger. Many factors will drive this acceleration, according to one senior economist.
Xander Snyder (pictured top), senior commercial real estate economist for First American, said the first factor that will propel the sector in the new year is liquidity.
“Increased liquidity will be a major driver in 2026,” Snyder told Mortgage Professional America. “As buyers and sellers align more consistently on pricing and as more owners are compelled to act when loans mature, transaction volumes are likely to rise.”
Lower rates, lower returns
Snyder said the commercial space will enter a new cycle in the year ahead. While rates are still higher than pandemic lows, they are aligned with historical mortgage rates when excluding COVID-era rates. While these lower rates could drive deals, he said not to be surprised if equity returns are lower.
“While the new CRE cycle is here, it will look different than recent ones,” Snyder said. “Interest rates might feel high compared to 2021, but they are still near multi-decade lows, as are cap rates. Limited valuation tailwinds, something not seen since the 1990s, mean there will be an increased focus on income in this cycle and, therefore, efficient operations.
“Experienced operators will have an edge. Higher interest rates have driven LTVs down industry-wide. Less debt suggests that equity returns will be lower in this cycle as well.”
Another factor driving deals will be continued price reductions in specific markets. While these deals won’t be available everywhere, brokers may be able to secure discounts in certain cities and commercial types.
“Some markets will underperform relative to national levels,” he said. “While prices have stabilized nationally, some markets still face price declines. For example, cities with near-term apartment oversupply will need time to lease excess units, and prices could continue to decline if rents fall further.”
Lower prices may also emerge as more distressed properties are identified. Snyder said more of those properties will emerge, along with challenges with delayed construction projects. Both types of commercial properties will require some work to get deals done.
“Not all distress has surfaced yet,” he said. “As loan maturities force more sales or restructurings, distressed properties will continue to trade at discounts. Stalled construction projects – especially large ones – pose challenges, not only for developers, but also for local governments and nearby residents. These projects will require creative, risk-tolerant capital.”
Zack Simkins, managing director at Vaster, echoed Snyder’s thoughts on repricing. He told Mortgage Professional America that proper repricing could lead to a condo surge in 2026.
“In Florida, specifically Miami, the key phrase I always say is repricing,” Simkins said. “Where are things going to get repriced at? On the commercial front, people acquired land at elevated premiums during COVID and are trying to break ground on their developments.
“Their costs might be too high, and they may be forced to sell or abandon their project. And if they sell at losses, that's going to hopefully, you know, refresh and replace the market to a point of more stability for the next project or the next wave of development.”
Falling rates drive deals
While commercial deals are more rate-resistant than consumer loans, it doesn’t mean a continued slide in mortgage rates won’t help the commercial space.
“Falling mortgage rates would certainly support CRE transaction activity, both sales and refinances,” Snyder said. “We saw this briefly when the 10-year Treasury yield declined for nearly 45 days in the third quarter of 2024, and transaction volume picked up in the fourth quarter before long-term rates moved higher again.”
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— Mortgage Professional America Magazine (@MPAMagazineUS) December 11, 2025
Snyder said there are two ways declining rates can increase the chances of closing commercial real estate deals. Customers could look for a well-timed refinance to take advantage of the lower rates, or they could be sitting on loans that are soon to mature.
“Lower rates can boost refinancing volume in two ways,” he said. “Owners with near-market-rate loans may refinance opportunistically during rate dips, provided transaction costs don’t outweigh expected savings. Or owners with below-market-rate loans nearing maturity, or converting from fixed to floating, will weigh the trade-off between, as an example, a potential 200 bps increase now versus an uncertain, but possibly larger increase later.”
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