Senior economist shares sectors brokers should target this year
The commercial real estate sector has worked through some challenges over the last couple of years. Some of those challenges will persist into 2026, which could provide opportunities for mortgage brokers.
After many CRE sectors stabilized in 2025, there is room for acceleration in the space in the new year. However, brokers will need to be mindful of certain sectors and the challenges that await.
Still, one senior economist is optimistic about the trajectory of the commercial market, which should benefit both CRE brokers and non-QM originators.
Xander Snyder (pictured top), senior commercial real estate economist for First American, said the first thing brokers need to keep in mind is that closing deals in the new year may come down to the terms and not necessarily the rate.
“A more active market will also be more competitive,” Snyder told Mortgage Professional America. “Competing solely on interest rates will limit brokers’ ability to win business. Instead, focus on creative terms beyond just the rate.”
Overcoming distress
Part of the reason these deals will need creative terms is that many distressed properties still need further loan extensions or refinancing.
“It will be a mix,” Snyder said. “Properties affected mainly by short-term issues – capital structure, execution, or temporary oversupply – should benefit from improving conditions and rising prices. If a property is underwater, but still servicing debt, lenders may extend until values recover, making these better candidates for refis later.
“While extend-and-pretend strategies persist, some lenders may be unwilling to grant further extensions. These situations will require refinancing or new debt, depending on how resolutions are structured.”
However, some properties may not be able to recover from the issues facing them. Snyder said these areas will likely need a more substantial plan to solve their problems.
“Properties with more fundamental challenges – lack of demand, poor location, limited amenities – will remain problematic,” he said. “If no one wants to lease the space, the property has little future. Even if lenders have extended these loans, at some point, they’ll need a more substantive resolution. These loans are less likely to be refinanced when values remain below the outstanding balance, as lenders are hesitant to recognize impairments.”
Snyder said brokers should consider looking into distressed multifamily properties as an opportunity to find bargain deals for their clients.
“Consider targeting assets already in or near distress that could be acquired at a discount and recapitalized or refinanced with agency debt,” he said. “Agencies have increased their loan purchase caps by 20% for 2026 in anticipation of greater purchase demand.”
While he doesn’t see a massive surge in forced-sale properties, some of these properties may need new financing, creating opportunities for brokers to help facilitate these deals.
“Many properties won’t face forced sales but will need fresh funds to address strained capital structures, cure covenants, fund capex, or bridge to future refinancing,” Snyder said. “Expect recapitalizations and bridge loans to represent a meaningful share of deal flow as liquidity improves.”
New office debt
The office sector continues to face significant challenges, even as some prime office real estate is starting to bounce back. However, for struggling office space, it’s not as simple as just converting the property.
“Distress remains high,” Snyder said. “While outcomes for these properties are uncertain, many will eventually require new debt. Remote work fundamentally changed how much office space is needed in today’s economy. That doesn’t mean all office buildings are struggling – many Class A+ assets have occupancy rates above 90%, but overall, we have too much office space, and some will need to be repurposed or rebuilt.
“Adaptive reuse is one option, but it’s costly and highly specialized. So far, conversions haven’t occurred at a scale that meaningfully shifts the supply-demand fundamentals for office or multifamily.”
From political uncertainty and tariff debates to rising credit costs and AI disruption, Jonathan Hornik of NPLA outlines the key forces that will define mortgage lending in 2026. https://t.co/Imft4PiejH
— Mortgage Professional America Magazine (@MPAMagazineUS) January 5, 2026
While many of the funding demands will be met by commercial real estate lenders, non-QM lenders continue to gain traction in the space. Snyder said he thinks the sector will continue to grow in 2026, especially as brokers seek solutions for unique borrowers or distressed properties.
“I expect the non-QM space to keep growing,” he said. “It addresses key pain points for borrowers who don’t meet agency guidelines, but want to purchase properties with sufficient cash flow to cover debt service. As transaction volume rises, lenders will compete on terms beyond interest rate, which often leads to looser credit standards.
“Non-QM and other risk-tolerant capital sources – such as mezzanine and preferred equity – will remain critical for distressed or near-distressed properties that need additional funds to complete projects.”
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