Income remains compelling, downside risks are moderating and the opportunity set is expanding as market activity begins to recover. In an environment where property fundamentals are stabilizing but price appreciation remains uncertain, debt continues to offer the most efficient way to generate return while preserving capital.

The lending backdrop should become increasingly supportive in 2026, driven by both renewed transaction activity and a large refinancing pipeline. Total CRE sales volume of approximately $545 billion in 2025 remained well below normalized levels, but we expect activity to improve by 10% to 20% over the coming year. More importantly, an estimated $1.7 trillion of CRE loans are scheduled to mature over the next two years. Many of these loans have already been extended or modified and are now approaching final maturity, forcing borrowers to refinance or sell.¹ Even if transaction volumes recover only gradually, this maturity wall represents a substantial and durable source of demand for capital.

Private CRE debt market share and dry powder

Private lenders—including debt funds, mortgage REITs and other alternative providers—have continued to gain market share. These lenders now account for roughly 14% of CRE lending, up from about 8% five years ago.¹ As in corporate private credit, flexibility and speed are key advantages. Unlike corporate private credit, however, dry powder has declined as deployment has outpaced fundraising.

The past few years have not been without stress. Delinquencies and distress rose meaningfully, though lenders generally opted to modify and extend loans rather than force sales into illiquid markets. That process now appears to be cresting. New distress has begun to decline, workouts are increasing and realized losses to date have been relatively modest. As this backlog clears, lenders should increasingly be able to shift from triage to origination—generally the final checkpoint in a new cycle.

Quarterly net new distress in U.S. CRE market

The Federal Reserve has reduced its policy rate by 175bps since mid-2024, and we expect modest additional easing in 2026. While lower short-term rates have provided relief to floating-rate borrowers, absolute yield levels remain attractive for investors. Opportunities span the capital stack and rate structures, but we see the most compelling risk-adjusted returns in floating-rate, value-add senior loans. As buyers target capital- starved assets and seek to execute operational improvements, these loans offer yields comparable to B-rated high yield bonds and broadly syndicated loans, with materially stronger structures and hard asset collateral.

Spreads for corporate and CRE credit