- A 17.5% slide took CREFC’s board sentiment index to 83.3 in Q3 2026 from 101.0, the weakest since Q3 2023 and 34% under the Q4 2024 record, with every core question lower.
- Mortgage and cap rates worry 92% of respondents, up from 53% in Q2, and 78% expect the 10-year at 5.00% or higher at year-end.
- Expectations for fundamentals and borrower demand turned negative on balance, while 61% expect CMBS delinquency at 8.00% or higher at year-end, up from 7.85% in August.
The CRE Finance Council’s Board of Governors sentiment index dropped to 83.3 in the third quarter of 2026, down 17.5% from 101.0 in Q2 and its lowest reading in three years.
The index is 34% below the record 126.6 set in Q4 2024. All nine core survey questions weakened, and the survey ran Sept. 21 to 28.
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Rates Lead the Retreat
The rate and economic-outlook questions fell furthest and together explain about 30% of the drop. Respondents were answering with the 10-year Treasury near 5%, roughly a full point above a year earlier, even though the federal funds rate is a quarter point lower.
Rates are the gloomiest topic: 92% of board members see mortgage and cap rates as a drag on their businesses, compared with 53% a quarter earlier, the worst rates result since Q3 2022. Looking at the economy, 62% anticipate weaker performance in the next twelve months, versus 24% in Q2.
Caution Spreads Beyond Rates
Outlooks for CRE fundamentals went net negative, the first time since Q1 2025. Thirty percent expect occupancy, rents and NOI to worsen, against 22% expecting improvement, down from 37%.
Optimism about federal policy faded, with 11% expecting a positive effect versus 26% last quarter. The share negative on the industry overall climbed to 38% from 8%.
Credit, Liquidity and CMBS Turn Cautious
Borrower demand outlooks tipped net negative, a first since Q4 2022, with 24% expecting more demand for financing and 35% expecting less. Investor demand is split evenly at 30% each way.
Twenty-four percent expect debt market liquidity to contract, up from 5%, and 32% (13% in Q2) expect CMBS and CRE CLO conditions to hurt results. On credit terms, 38% expect tightening and 19% modest loosening.
BofA Global Research puts spreads on AAA data center CMBS near 165 basis points in mid-September, against 85-120 elsewhere, and 41% of respondents expect them to widen.
Delinquency and Pricing Worries
With the 10-year at 5.00% on Sept. 18, 78% expect it at 5.00% or higher on Dec. 31, and 41% pick 5.00% to 5.24%.
MSCI shows prices 0.2% higher than a year earlier as of July, yet 46% foresee declines across the coming year. Trepp put the CMBS delinquency rate at 7.85% in August, and 61% expect 8.00% or higher by year-end, including 19% who see 8.50% or more.
Why It Matters
CREFC’s Raj Aidasani said in a statement that this is the board’s gloomiest reading in three years, with worry now extending from the next Fed meeting to inflation, deficits and the long end of the yield curve. Written comments cited record Treasury issuance and sticky inflation.
The worries line up with the market, as CRE Daily reported when the 10-year Treasury yield put lenders on alert and as CMBS delinquency hit its highest since 2020.
What’s Next
Watch whether the 10-year settles above 5% by year-end and whether CMBS delinquency crosses 8%. Respondents expect refinancing risk, wider CMBS spreads and price pressure for office and multifamily if long-term rates stay high.
