Competition among US commercial real estate lenders is lowering margins for loans on properties with reliable income, but it is offering less relief to owners approaching repayment deadlines. Following the Federal Reserve’s September 2026 interest-rate increase, borrowers with weaker buildings or floating-rate debt face a more restrictive market, with Trepp estimating a potential refinancing shortfall of nearly $19B for office and apartment loans over the next 12 months.

The estimate concerns debt reaching deadlines after exhausting extensions, highlighting the difference between lenders’ appetite for new business and borrowers’ ability to replace existing financing.5B of office loans in commercial mortgage-backed securities, or CMBS, reach their deadlines during that period. Assuming a refinancing rate of 7%, Trepp estimates that more than a third would require owners to contribute additional money. The resulting office financing gap would be about $1.9B, even with replacement loans available.

Apartments account for the larger potential shortfall. About $160B of apartment debt matures over the next year, and roughly 43% could not be refinanced at current rates without additional cash, according to Trepp. That leaves a gap of about $17B. Extensions could soften the immediate burden for some borrowers: banks hold about $84B of those loans and typically extend about half of maturing debt. Trepp estimates that would reduce bank borrowers’ gap to roughly $5B to $11B.

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The Fed’s September increase was its first since 2023, followed by an October pause. Yet lending margins have continued to narrow for stronger properties. Trepp’s survey, composed mainly of life insurance lenders, recorded its lowest quoted spreads. CBRE reported that fixed-rate commercial loan spreads averaged 197 basis points over Treasurys in the third quarter, 23 basis points below a year earlier. Trepp research head Andy Boettcher said lenders had gradually reduced spreads despite higher Treasury yields, with office loans the exception.

Lower margins do not necessarily mean cheaper borrowing. Slatt Capital, which mostly arranges loans below $10M, reported third-quarter fixed-rate quotes of about 6.5%, compared with 6.2% a year earlier, despite lenders absorbing some of the Treasury yield increase. Nor is the competitive pressure uniform. Niraj Shah, global head of credit for real estate at Harrison Street Asset Management, said spreads had generally remained relatively flat in its experience. The firm, which says it manages more than $110B, prioritises credit quality over volume.

Broader lending indicators also suggest that competition is concentrated rather than universal. CBRE’s loan-closing activity index fell about 30% between the second and third quarters. Banks reported net tightening across every commercial real estate lending category in the Fed’s latest senior loan officer survey, reversing the previous quarter’s easing. Alternative lenders accounted for 48% of nonagency commercial property loans in the third quarter, compared with 37% a year earlier, while banks’ share declined to 26%, according to CBRE.

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Securities markets show a similar retreat. Trepp’s pricing desk reported that the riskiest investment-grade bonds in new CMBS transactions paid about 5.4 percentage points over Treasurys, against 4.8 in early September. Conduit CMBS issuance fell to $1.6B in October from $6.5B a year earlier. Commercial real estate collateralized loan obligations issued $8.7B in September and October, but Boettcher said those transactions had been prepared over the summer. Many issuers are now waiting until the new year before doing more deals.

Property transactions reflect the tension between available credit and higher financing costs. At brokerage Matthews, closings rose 18% in the 60 days through Oct. 26, while deals falling out of contract increased 50% from a year earlier. Founder and chief executive Kyle Matthews said buyers without locked borrowing rates accounted for most failures. In the same 60-day period, transactions receiving price reductions after signing increased to 75 from 38 a year earlier. Cancellations subsequently eased as the 10-year Treasury yield retreated from above 5%.

For borrowers unable to secure sufficient refinancing, extensions and additional financing layers offer alternatives, but at a cost. Stephen Buschbom, Trepp’s head of applied research and analytics, said struggling owners were turning to preferred equity and subordinate debt. Banks were also requiring more equity before modifying loans. Even Blackstone missed the October maturity of a floating-rate CMBS loan backed by apartments from Seattle to Bradenton, Florida. The loan, reduced to $517.7M from an original $1.3B, entered special servicing.

Headline delinquency figures provide limited reassurance. Trepp’s CMBS delinquency rate declined to 7.9% in October from 8% in September only because a $975M loan became current; office delinquencies rose to 12.3%. Nearly every CMBS loan reaching final maturity from August through October had previously been current on payments. Nevertheless, only 36% to 41% of each month’s group had been repaid by October, according to Trepp, underscoring the distinction between servicing debt and refinancing it.

The next deadlines will test that distinction further. Another $4.4B matures in November 2026, and Trepp estimates that more than two-thirds could not be refinanced in full without additional cash from owners. Fixed-rate loans in that group average about 4%, against roughly 6.4% to 7.1% for new financing. At Mavik Capital, chief executive Vik Uppal said the pipeline for restructuring or recapitalising troubled properties had roughly tripled since summer. His assessment challenges the idea that lender competition signals broad financial health: borrowers approaching his firm now need funding rather than merely want it.