Private lending is going to stay front and center as we wrap up 2026 and head into next year, but the days of cheap capital are gone, and the CRE industry overall can’t expect a return to an easy-money environment.
Because sticky inflation keeps hovering above the 2% target, the Fed is staying cautious and holding the benchmark rate at 3.50% to 3.75% (as of June).
The cost of capital, therefore, remains high for lenders. They’re charging borrowers more and taking fewer risks as a result: to get funded, borrowers need to show that the property’s income can carry the debt and that their exit does not rely on rates falling.
What does this mean?
Do you plan to acquire a property and refinance after the business plan is complete?
The lender will not approve the loan just because your plan sounds profitable.
They want to know whether your payoff plan will still work if you have to refinance or sell in today’s market.
If you’re seeking construction or value-add financing, the same applies.
Lenders are all too aware that your total project costs could rise abruptly while you’re improving the property, and that appreciation cannot cover those mistakes in this high-rate market.
More lending volume does not mean easier approval
Commercial and multifamily lending activity should increase overall this year; analysts say that total commercial mortgage originations will eventually reach $805.5 billion (quite a step up from $633.7 billion in 2025). Multifamily originations will also likely climb to $399.2 billion.
More transactions are returning to the market, and deals that were delayed in 2024 or 2025 may finally reach closing.
But those higher volumes don’t necessarily indicate that lenders are loosening their standards. Real estate valuations have already dropped by roughly 20% from their peak.
Direct lenders are writing new loans against these lower property values to reduce the risk of over-leveraging.
Related blog: When it comes to financing CRE, should you borrow from a bank or a private lender?
Refinance pressure is bringing more investors to private capital
A large amount of commercial and multifamily debt still needs to be refinanced this year: $875 billion in commercial and multifamily mortgages is scheduled to mature, equal to 17% of the $5.0 trillion in outstanding commercial mortgage debt held by lenders and investors.
That’s lower (though not by much) than the $957 billion scheduled to mature in 2025 and still large enough to keep refinancing pressure high.
At today’s rates, the same property may not qualify for enough bank debt to pay off the old loan.
Private lending can give the investor time to improve the property before trying again.
Bridge loans, in particular, can hold the property over until permanent financing. You can use that time to:
- lease vacant space
- finish repairs
- resolve title issues
- reposition the property
But the private lender will not underwrite the loan based only on what you hope the property becomes, even if it clearly has a lot of potential.
If your ability to repay the bridge loan depends entirely on a stronger market next year, the lender may cut the loan amount to reduce risk.
The silver lining: CRE appears to be in the recovery cycle
If you’ve been waiting for a sign that the commercial real estate market is finally shaking off the rate shock, we might finally be seeing it: we may be moving out of the freeze and into a visible recovery cycle, and that confidence is trickling down from the stock market into actual property debt.
Public REIT valuations (which usually act as an early warning system) have firmly rebounded from their 2023 rock bottom.
As those public stocks recovered, private market values across major property types began to level out and stabilize.
That stability was what credit markets were waiting for. Because lenders finally feel confident about property values, they have started loosening purse strings again.
Interestingly, nearly three-quarters (73%) of institutional CMBS loans successfully reached their payoff targets last year, proving that despite today’s higher interest rates, deals are getting done.
What lenders will want from you in 2026
If you’re planning to approach a private lender this year, you need to look at the market from their point of view: they want to see how your specific asset can survive a volatile environment.
1. More borrower equity
You need to be prepared to bring more skin to the game. Lenders want a massive equity cushion to protect themselves against any further market drops. Many are capping their exposure at 60% to 70% of the property’s current value.
2. Proof of current cash flow
They also want to see that the property’s cash flow is stable: that money is coming in from tenants who are paying under signed leases right now (instead of a spreadsheet projection of what you hope to lease next year).
3. A foolproof exit strategy
Private CRE lenders need to see a payoff path that they can verify. When they stress-test your exit, they will assume that the property will sell for less down the road (higher exit capitalization rates). They will also account for the risk that interest may continue to be volatile and that property valuations might dip (yet again).
4. Idiosyncratic value
Unlike rigid institutional CMBS loans (Wall Street bonds that bundle thousands of properties into a single cookie-cutter box), private credit is highly customized.
Private lenders look at the asset-specific strengths of your unique property. If you have a tangible, income-producing building with a unique advantage in its local neighborhood, more private lenders may be willing to tailor flexible loans specifically to fit that asset.
Talk to Private Capital Investors about your next commercial real estate loan.
Our direct CRE lending company offers bridge loans to carry the property while you work toward permanent financing, along with other financing solutions in the $1 million to $50 million range, designed specifically for the pressures the commercial property industry is facing.
Source:
https://www.cbre.com/insights/books/us-real-estate-market-outlook-2026
https://www.investopedia.com/pce-inflation-report-may-12006400
https://www.federalreserve.gov/newsevents/pressreleases/monetary20260617a.htm
https://nationalmortgageprofessional.com/news/mba-solidifies-2026-forecast
https://tradingeconomics.com/united-states/interest-rate
https://www.wsj.com/buyside/personal-finance/mortgage/mortgage-rates-today-6-26-2026
