Top 5 Signs the CRE Market is Shifting (And How Smart Sponsors are Responding)

Market shifts rarely announce themselves. They show up quietly — in the deals that take longer to pencil, in the conversations that get harder, in the assumptions that no longer hold the way they used to. At HALL Structured Finance, we see the market through the lens of every transaction that crosses our desk. And what we’re seeing right now tells a clear story. 

Here are the five most significant signs that the CRE market is shifting — and what the sponsors who are navigating it well are doing differently. 

1. Underwriting Assumptions Are Getting Stress-Tested Like Never Before 

What we’re seeing: Deals that would have sailed through underwriting two years ago are now getting a much harder look. Cap rate assumptions, rent growth projections, and lease-up timelines that felt conservative in 2021 and 2022 look optimistic today. According to CBRE’s H1 2025 Cap Rate Survey, investors’ biggest concerns heading into this year included higher-for-longer interest rates, tight credit conditions, and notably, differing buyer and seller expectations. Those concerns haven’t gone away. Lenders across the spectrum are running more scenarios, asking harder questions, and moving more deliberately. 

What smart sponsors are doing: They’re getting ahead of it. Rather than waiting for a lender to push back on their assumptions, the sharpest sponsors are stress-testing their own deals before they come to market. They’re presenting multiple scenarios — base case, downside, and recovery — and showing lenders exactly how the deal performs if things don’t go according to plan. That level of preparation doesn’t just move deals faster. It signals the kind of sponsor a lender wants to work with. 

2. The Gap Between Buyer and Seller Expectations Is Still Wide 

What we’re seeing: Transaction volume has started recovering — Altus Group’s Q4 2025 CRE Transaction Analysis reported that total CRE transaction volume reached $560.2 billion for full-year 2025, a 14.4% year-over-year gain. But that recovery has been uneven. In many sectors, the primary constraint isn’t capital availability, its pricing expectations. Sellers who acquired or recapitalized at peak valuations are reluctant to accept where the market has moved. Buyers, meanwhile, are underwriting today’s cost of capital, and the two sides often aren’t meeting in the middle. CBRE noted that the average bid-ask spread for Class A office properties in major markets widened to approximately 10 to 12 percent in late 2022, up from 5 to 7 percent in 2021, a gap that has only partially closed. 

What smart sponsors are doing: The sponsors who are transacting right now aren’t waiting for the gap to close on their own. They’re identifying motivated sellers, those with near-term debt maturities, partnership pressures, or assets that need capital they can’t access, and structuring creative deals that work for both sides. They’re also being selective, focusing on markets and asset classes where fundamentals remain strong enough to support today’s pricing. 

3. Refinancing Is No Longer a Given 

What we’re seeing: One of the most significant shifts we’re observing across our deal flow is the number of sponsors realizing their exit, specifically a refinance into permanent agency or bank debt — is no longer as straightforward as their original underwriting assumed. The numbers are stark: according to MSCI, over $930 billion in CRE loans will come due in 2026 alone — more than triple the volume that matured in the second half of 2025. Many of these loans originated when rates were at historic lows, and borrowers who locked in financing at 3% to 4% are now facing refinance rates that are nearly double. According to CRE Daily, the average interest rate on CRE loans issued in 2025 hit 6.24%, up from 4.76% on older maturing debt. Deals that were penciled to refinance at a 65% LTV are coming in at 55% or less. 

What smart sponsors are doing: They’re revisiting their exit strategies before they’re forced to. Smart sponsors are proactively modeling what their refinance looks like at today’s rates and today’s lending standards,  not the rates they underwrote to two or three years ago. Some are extending bridge terms; others are bringing in additional equity, and others are exploring structured finance solutions to bridge the gap. The common thread is that they’re not waiting until the loan matures to have that conversation. 

4. Private Capital Has Become the Dominant Execution Channel 

What we’re seeing: Traditional bank lending in CRE is being supplemented, and in some cases replaced, by private credit at a scale we haven’t seen before. According to Agora’s 2026 CRE Lending Outlook, alternative lenders like debt funds and mortgage REITs captured 37% of non-agency closings in 2025, outpacing banks at 31%. LoanBase’s Q4 2025 platform analysis found that over 63% of submitted deals were routed to debt funds and private lending groups, reflecting a clear shift in how brokers are prioritizing capital sources. For sponsors, this isn’t just a trend to watch; it’s a change that requires actively updating who they’re talking to and how they’re approaching the capital markets. 

What smart sponsors are doing: They’re expanding their lender relationships beyond their traditional banking contacts. Sponsors who are closing deals in today’s market understand that the best execution may come from a debt fund, a mortgage REIT, or a structured finance lender rather than a regional bank, and they’re building those relationships proactively, not reactively. They’re also coming to those conversations better prepared, knowing that private lenders move quickly and expect sponsors to do the same. 

5. Sponsorship Quality Has Become a Primary Underwriting Factor 

What we’re seeing: In a market where execution risk is elevated, the quality of the sponsorship team has become a much larger part of the underwriting ordeal. It’s not enough to have a strong asset in a good market. According to the Federal Reserve’s January 2026 Senior Loan Officer Opinion Survey (SLOOS), while overall bank lending standards have loosened for the first time since 2022, underwriting for specific refinancing deals, especially those maturing in 2026, continues to tighten, with borrower profiles and asset quality remaining critical. Lenders are asking deeper questions about sponsor liquidity, their ability to support a deal if things go sideways, their experience navigating a down cycle, and the strength of their operating team on the ground. 

What smart sponsors are doing: The sponsors who are winning in today’s lending environment understand that they are as much a part of the underwriting as the asset itself. They’re coming to lender conversations with a clear picture of their balance sheet, a transparent account of their track record — including the deals that didn’t go perfectly — and a team that demonstrates operational depth. Sponsors who treat the relationship as transactional are finding fewer doors open. Sponsors who invest in the relationship are finding that lenders will work harder to find a way to get their deals done. 

What This Means for the Road Ahead 

The CRE market is not broken; it’s recalibrating. Transaction volume is recovering; lending standards are beginning to ease in certain segments, and private capital is filling gaps that traditional lenders have left behind. But the sponsors who are positioned to thrive in this environment aren’t the ones waiting for conditions to return to 2021. They’re the ones who have adapted their underwriting, expanded their lender relationships, and approached the market with the discipline and transparency that today’s environment demands. 

At HALL Structured Finance, we’ve navigated multiple market cycles. We know that the sponsors who come out the other side strongest are the ones who stay engaged, stay transparent, and stay open to creative solutions. If you’re working on a CRE transaction and need a capital partner who understands where things stand, contact us to get started.