New Normal, New Underwriting: CRE is Resetting for the Next Maturity Wall

Article originally posted on Globe St. on January 30, 2026

In commercial real estate, the bet is no longer that rates will “normalize,” but that they won’t—and that deals still have to work anyway. With a $190‑billion maturity wall bearing down between 2026 and 2028, investors are shifting from hoping for a rate rescue to underwriting a stubbornly expensive cost of capital, accepting flatter yield curves, and relying on lower leverage, cleaner business plans, and demonstrably durable cash flow to justify buying at discounts to replacement cost rather than waiting for a cheaper refinance that may never arrive.

On the latest Trepp Market Pulse discussion, Trepp Chief Product Officer and TreppWire co‑host Lonnie Hendry argued that the industry has effectively moved from a “higher for longer” mindset to a “new normal” framework for rates. In his view, investors have “that part of the equation…baked in,” with forward curves and political incentives pointing to modest cuts at best rather than a return to pre‑2022 financing costs.

Hendry noted that, absent a left‑field shock, the rate backdrop now feels “fairly certain,” with markets broadly pricing something like 50 basis points of easing over 2026, leaving all‑in coupons still well above the last cycle’s trough.

This shift matters for underwriting because it removes the easy out: sponsors can no longer pencil a base case that depends on rapid cap‑rate compression or aggressive term‑out at meaningfully lower coupons.

The political overlay reinforces that realism. With midterm elections looming, Washington has every incentive to lean on lower mortgage rates and “good” macro headlines, but even so, the Trepp team emphasized that the most likely outcome is a range‑bound 10‑year Treasury rather than a collapse in yields. In that environment, the cost of debt is no longer the main unknown; employment, business formation, and operating fundamentals carry more of the risk.

Structuring into 2026–2028: more equity, more structure

For the 2026–2028 maturity wall, the Trepp data show a large volume of loans coming due, but with better debt yields than the market faced just a year earlier, at least in the securitized universe. Head of Applied Research and Analytics Steven Buschbaum noted that for CMBS and other securitized loans maturing in 2026, the weighted average debt yield is roughly a full percentage point higher than that of the comparable 2025 cohort, improving the odds of refinancing for a meaningful share of borrowers.

That does not mean the wall disappears. Across CMBS, agency, CRE CLO and SASB, more than $190 billion of loans are scheduled to come due in 2026, with about $80 billion representing “hard” maturities without extension options. The result on the ground is a market where capital “is behaving more like a spotlight than a floodlight,” as Buschbaum put it, concentrating on assets where investors can underwrite durable demand and near‑term cash flow.

Deal structures have adjusted accordingly. Leverage is lower, with lenders requiring sponsors to write larger upfront checks or commit to future capital as part of well‑defined business plans. In many cases, especially for transitional assets, the stack now leans heavily on structured features—tighter cash‑management triggers, earn‑out mechanics, and performance‑based extension options—rather than simple proceeds‑maximizing senior debt.

“Optimistic but realistic” underwriting in practice

Nowhere is the discipline more visible than in multifamily, where a multi‑decade high in new supply collided with floating‑rate debt and aggressive rent‑growth assumptions in the 2021–2022 vintages. Buschbaum’s analysis of Fannie Mae and Freddie Mac books shows that for loans originated during that period, a notable slice—tens of billions of dollars—still carries debt yields below 7 percent, even several years into the business plan.

That cohort explains much of the headline anxiety. But zooming out, Trepp’s numbers indicate that only a minority of agency loans sit in that low‑yield bucket, and overall delinquency remains low, reflecting the fact that many borrowers can still cover debt service despite margin pressure.

Hendry’s takeaway is that underwriting standards were markedly tighter post‑GFC, yet “market fundamentals have a way to overrule what a spreadsheet says,” particularly for deals done at the peak of pricing with pro‑forma income and thin expense cushions.

Sponsors still lean on upside—through targeted capex, repositioning, or operational gains—but treat it as true upside, not the number required simply to take out the debt.

Sponsor expectations and the new negotiation

The rate regime has also reset sponsor psychology. During the “higher for longer” phase, many owners treated the environment as temporary and clung to 2019 pricing, waiting for either a policy rescue or a buyer willing to underwrite a return to the old world.

The Trepp team now sees a different tone from institutional capital: investors are more willing to transact at discounts to replacement cost, acknowledging that the entry basis, not rate timing, will drive performance.

Hendry observed that large institutions increasingly justify allocations by arguing that they are “buying at a discount to replacement cost,” a narrative that has become credible across many assets where values have already reset. That view supports selective risk‑taking even with the current cost of capital, especially in segments like data centers and well‑located multifamily, where demand visibility is high.

At the same time, lenders and equity partners are scrutinizing sponsorship more closely. Capital is gravitating toward operators with demonstrated execution in specific niches and markets, and away from thinly capitalized syndicators who leaned on inexpensive leverage and retail capital in the last cycle.

Deals that clear are the ones where, as Buschbaum put it, “the story is clean and the cash flow is defensible”—and where the base case works without heroic assumptions about refinancing conditions three years out.

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