Why CRE Interest Rates Are Quietly Trending Lower — And What That Means for Investors

If it feels like the lending environment has shifted faster than the narrative, you’re not imagining it. Commercial real estate borrowing costs today are meaningfully lower than a year ago — even compared to the period when the 10-year Treasury briefly hit the 3.6% range. The result is a rare moment in this cycle where spreads, liquidity, and competitive lender dynamics are delivering real relief for active investors. Here’s what’s driving it, and why it matters.

Fed Cuts Are Only Part of the Story

The Federal Reserve made its second 25-basis-point cut on October 29th, bringing the overnight rate into the 3.75–4.0% range. The 10-year Treasury nudged up to roughly 4.1%, but the environment is still far more stable than last year when cumulative cuts pushed the 10-year up nearly 90 bps. The headline: Treasury volatility isn’t the primary force shaping CRE lending right now.

Lower Rates Are Bringing Buyers Back Into the Market

Last year’s dip in rates was enough to drive a 20% jump in Q4 CRE transaction activity. And this year, we’re seeing signs of that trend emerging again. Within The Christensen Group, buyer engagement is up nearly 25% in the last 30 days compared to the prior quarter. We’re seeing more tours, more underwriting requests, more conversations around terms and execution. Activity almost always returns before national data confirms it.

Banks Are Back Online

In 2024, banks were in repair mode — stabilizing deposits, managing risk, pushing out maturities. Today, the cleanup is mostly complete. With regulatory expectations easing and reserve requirements trending downward, banks are stepping back into CRE lending:

• Competing more aggressively

• Offering more flexible structures

• Tightening spreads

Their re-entry is adding meaningful liquidity and driving rates downward.

Private Debt Funds Are Flooding the Market

At the same time, private lenders have become a major force. Short-term bridge lenders and debt funds have raised $24 billion in the first three quarters of 2025 alone — nearly double last year. These funds are:

• Filling capital gaps for refinances

• Covering renovation or stabilization shortfalls

• Providing creative structures without personal guarantees

Their presence has forced conventional lenders to sharpen pricing and increase competitiveness.

Lender Spreads Are Compressing

With the Fed signaling (but not committing to) additional cuts in 2026, lenders are no longer padding spreads. Many expect:

• Lower cost of capital

• Stable forward curves

• Stronger refinance demand

This shift has pushed overall CRE borrowing costs down roughly 50 basis points year-over-year.

Where Rates Are Landing

Benchmarked ranges:

• Agency multifamily: Upper 4%

• Life companies: Upper 4%

• Banks: Low 5% to low 6%

• CMBS: High 5% to 7%

• Debt funds: Mid-6% to mid-8%

Exact pricing still varies by leverage, asset type, sponsor strength, and geography — but the directional trend is clear.

Cap Rates Remain Elevated — Creating a Beneficial Spread

Even though debt costs are falling, cap rates remain elevated relative to 2021–2022. That creates a rare window where leveraged investors enjoy a more positive spread and stronger yield environment. It’s a moment where disciplined buyers can outperform.

The Window Could Be Short

In his latest press conference, Jerome Powell clarified that a December rate cut is not guaranteed. Wall Street immediately toned down expectations. Translation: this lower-rate window may not last long. Conditions are still fluid, and macro catalysts could push rates either direction.

Investor Takeaway

Behavior is shifting ahead of the data — lenders are loosening, buyers are re-engaging, and debt is becoming accretive again. Lower rates don’t remove risk, but they do open opportunity for investors who are prepared and decisive. This is the time to tighten underwriting, reconnect with lenders, and position ahead of the next wave of transactions.

If you want a deeper Pacific Northwest-specific breakdown — lender appetite, submarket yield spread analysis, or refinance scenarios — I’m tracking the movement in real time.