CRE Debt Market Sentiment – August 2025

INSIGNIA Financial Services Market Commentary

Market Overview

Market focus is squarely on the September FOMC meeting following President Trump’s announcement that he will nominate Stephen Miran, head of the White House Council of Economic Advisers, to the Federal Reserve Board. Miran is known for his dovish stance, alignment with Trump’s tariff policies, and criticism of the Fed. While Senate confirmation before the September 16–17 meeting may be challenging, his appointment would likely bolster the push for immediate rate cuts.

The market assigns a 93% probability to a 25 bps cut next month, with three additional cuts projected by year-end. A 50 bps cut remains possible depending on inflation and employment data in the coming weeks. The CME FedWatch Tool continues to be the benchmark for tracking rate probabilities.

Capital Sources

Life Companies

LifeCos are benefiting from tighter corporate bond spreads after recent highs, bringing some relief to cost of capital for well-positioned borrowers.

• Rates: 5.15% to 6.35%

• Leverage: Up to 65%, with best pricing at ≤ 60% LTV

• Spreads: 130 to 225 bps over Treasuries, depending on size, profile, and leverage

Low-leverage, stable assets continue to capture the most competitive pricing.

Banks

Bank activity continues to strengthen in 2025, supported by a more normalized yield curve. Appetite remains strongest for stabilized properties with strong tenancy and predictable collections.

• Fixed Rates: 5.55% to 6.55% (3-, 5-, and 7-year terms, step-down prepay)

• Floating Rate: SOFR plus 180 to 300 bps (effective 6.00% to 7.10%)

Conservative leverage and proven sponsors are securing the most attractive terms.

Debt Funds

Debt funds are stepping up activity as SOFR stabilizes. Bridge and lease-up executions remain popular for multifamily and industrial, alongside selective preferred equity behind agency senior loans.

• Spreads: 225 to 350 bps over SOFR

• Leverage: 65% to 75% LTC

• Focus: Stabilized debt yields, in-place cash flow, or lease-up scenarios

CMBS

CMBS spreads have been relatively stable this year, both in the new issue and secondary markets.

• Rates: 6.15% to 6.90%

• Terms: 5 to 10 years, fixed rate, up to 75% LTV, often full-term interest-only

Steady pricing continues to make CMBS a viable non-recourse option for longer-term debt.

Agencies

Agency production remains robust with record inflows over the past two months. While spreads have yet to widen, some movement could be on the horizon.

• Rates: 5.15% to 5.65% (buydowns to 4.85%–5.35% available)

• Terms: Up to 35-year amortization for select experienced sponsors

• YTD Volume: Fannie Mae at $34.6B (up from $24.0B in 2024) and Freddie Mac at $29.5B (up from $23.9B)

Rate buydowns remain an effective way to enhance cash flow in the current market.

Strategic Takeaway

Volatility in rate expectations and Fed policy continues to shape capital market conditions. For core, stabilized assets, today’s mid-5% rates from LifeCos and Agencies may represent an attractive entry point before potential spread widening. Transitional or lease-up deals can still access competitive proceeds through debt funds or bank floating-rate products while SOFR remains range-bound.

Borrowers should remain proactive, locking long-term fixed rates on quality assets while evaluating flexible capital sources for projects in transition. Agencies’ rate buydown options remain an underutilized tool for maximizing loan proceeds and preserving DSCR in a competitive lending environment.