- Term SOFR averaged 3.62% in Q2 2026, down just 4 bps from Q1 after four quarters of sharp declines.
- Total quote volume eased 4% to 1,794. Fixed-rate senior short quotes jumped 28% as borrowers rotated out of floating product.
- Both Treasury tenors now sit above year-ago levels for the first time this cycle, narrowing rate relief.
Commercial real estate borrowing costs went sideways in the second quarter of 2026. The average all-in rate slipped just 4 bps quarter over quarter. Altus Group’s US Debt Capital Markets Survey for Q2 2026 captured 1,794 quotes from 105 industry professionals.
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Two Years of Falling Benchmarks Come to an End
For nearly two years, SOFR carried most of the work of lowering borrowing costs. Every quarter of Fed easing pulled floating all-in rates lower. That stopped in Q2. Term SOFR averaged 3.62%, down only 4 bps from Q1 after four straight quarters of sharp declines. The benchmark is still 70 bps below where it sat a year ago. Sequentially, though, the trend has flattened. The Fed is on hold, and expectations for a 2026 cut have faded. Floating-rate borrowers should not expect much more relief from the benchmark side.
The Details
All-in rates fell 4 bps across all property types and subtypes. That marks a sharp deceleration. Q1 saw a 10 bps decline and Q4 2025 a 45 bps drop. Year over year, the average all-in rate is still down 71 bps. Construction was the biggest mover lower, down 26 bps to 6.08%. Office construction drove that decline, collapsing 178 bps to 6.19% after spiking the prior quarter. Hotel rates rose 25 bps to 6.07%, the largest increase of any property type. Apartment financing remained the cheapest in the survey at 5.22%.
Borrowers Rotate Into Fixed Rate Product
The quote mix shifted decisively. Fixed-rate senior short quotes jumped 28% to 498. That is 28% of all quotes received, a 7 percentage point gain. Floating senior short quotes fell 16% to 608 and lost 5 points of share. Total quote volume eased 4% to 1,794, down 24% from Q2 2025. Competition held up, with borrowers seeking new financing receiving 5.3 competitive quotes on average. The collateral mix moved too. Retail share climbed to 20% and office to 19%, both gaining ground on a quarterly and annual basis.
Why It Matters
Treasury yields backed up hard and reset the math for fixed-rate deals. The 5-Year UST averaged 4.09% in Q2, up 32 bps. The 10-Year averaged 4.42%, up 22 bps. Both tenors now sit above year-ago levels for the first time this cycle.
This widening benchmark divide was already reshaping CRE lending as falling SOFR favored floating-rate borrowers while Treasury yields pressured fixed-rate financing.
Spread compression softened the hit but could not fully offset the move. Floating all-in costs held steady while fixed all-in costs pushed higher. Office quote share has been stable to rising for two quarters. Lending looks to be returning to a long-beleaguered sector.
What’s Next
Altus notes the market has stopped debating rate cuts and started pricing the opposite. Fed funds futures put better than two-thirds odds on a hike before year-end. The policy rate is seen drifting toward 4% from the current 3.50% to 3.75% range. Sticky services inflation and a firm labor market argue against much term premium compression. The guidance for borrowers is direct. Underwrite to a flat-to-higher rate path. Hold rate-cap optionality while it is still reasonably priced. Treat any near-term rally as a chance to lock rather than a trend to ride.
