CRE Borrowers Shift to Fixed Rates as Borrowing Cost Relief Stalls Article originally posted on Globe St. on August 21, 2026 Commercial real estate borrowers increasingly pursued fixed-rate financing during the second quarter as the decline in borrowing costs lost momentum. Quotes for short-term, fixed-rate senior loans increased 28% from the previous quarter, while floating-rate senior quotes declined 16%, according to the Altus Group U.S. Debt Capital Markets Survey. SOFR Finds Its Floor The shift came as the Secured Overnight Financing Rate, the benchmark underlying many floating-rate loans, reached what Altus described as an effective floor. SOFR averaged 3.62% during the quarter, down just four basis points from the first quarter following four consecutive quarters of sharper declines. At the same time, the Treasury yields used to price fixed-rate financing moved higher. The five-year Treasury averaged 4.09%, up 32 basis points from the previous quarter, while the 10-year Treasury rose 22 basis points to 4.42%. Tighter lender spreads cushioned some of that increase but generally could not offset the rise in Treasury yields. Across all property types and subtypes, the average all-in borrowing rate declined just four basis points from the first quarter. That marked a sharp slowdown from the 45-basis-point decrease recorded during the fourth quarter of 2025. Financing costs remained substantially improved from a year earlier, however, with the average all-in rate down 71 basis points. Property Rates Diverge Apartments remained the least expensive property subtype to finance, with an average all-in rate of 5.22%. Residential financing overall increased seven basis points during the quarter to 5.33%, while industrial rose nine basis points to 5.4%. Both remained below their year-earlier levels. Office financing continued to improve despite the broader market plateau. Its average all-in rate declined three basis points to 5.84% and was 78 basis points lower than a year earlier. The medical office recorded the sector’s lowest rate at 5.58%, while trophy office held steady at 5.67%. Hotel financing posted the largest quarterly increase among the major property categories, rising 25 basis points to 6.07%. Construction recorded the largest decrease, falling 26 basis points to 6.08%, largely because office construction rates reversed a first-quarter spike. Lenders Revisit Office, Retail Office and retail also captured larger shares of financing quotes. Retail represented 20% of quotes, up from 17% in the first quarter and 13% a year earlier. Office increased to 19% from 17% in the prior quarter, which Altus said suggests lenders are gradually reengaging with the sector. Overall quote volume declined 4% from the first quarter and 24% from a year earlier to 1,794. Competition remained relatively steady, with borrowers seeking new financing receiving an average of 5.3 competitive quotes.