CREFC's 2Q 2026 BOG Sentiment Index Steadies Near Baseline as CRE Finance Sentiment Moves from Shock to Caution

NEW YORK, July 13, 2026 /PRNewswire/ -- The CRE Finance Council (CREFC), the trade association for the commercial real estate finance industry, today released its Second-Quarter 2026 (2Q26) Board of Governors (BOG) Sentiment Index survey results.

The index rose 0.9% to 101.0 from 100.1 in 1Q26, holding near the survey's 4Q17 baseline of 100.0 after the prior quarter's 20.2% decline. Beneath the modest headline move, results were mixed. Five of nine core questions improved – led by the economic outlook – while four softened, led by borrower and investor demand, which moderated from 1Q26's elevated readings.

Conducted from June 25 – July 6, 2026, the survey captured a market stabilizing after the geopolitical shock that drove last quarter's decline – but stabilizing into caution rather than conviction. Neutral was the most common answer on seven of the nine core questions, and views on interest rates remained the weakest reading for a second consecutive quarter. The survey consists of nine core questions and additional topical questions, which are not factored into the BOG Index. Ninety-five percent of the BOG responded to the 2Q26 survey.

Demand-side readings, while cooler than 1Q26, remained net positive: 42% of respondents expect stronger investor demand for CRE and multifamily assets versus 11% expecting less, and 45% expect higher borrower demand for financing versus 13% expecting less. This suggests the pullback reflects moderation from unusually elevated expectations rather than a retreat from the market.

Key Highlights from 2Q26 Index Core Questions:

• Economic Outlook: Economic sentiment recovered meaningfully from 1Q26's sharply negative reading. A majority (58%) now expect the U.S. economy to perform the same over the next 12 months, while 24% expect worse (down from 54% in 1Q26) and 18% expect improvement.
• Federal Policy: Policy expectations are evenly divided. Nearly half (47%) of respondents expect a neutral impact from federal legislative and regulatory actions, with the remainder split equally between positive and negative at 26% each.
• Interest Rate Impact: Rates remained the most negative core question for a second consecutive quarter. A majority (53%) expect a negative impact from elevated mortgage and cap rates, while 37% are neutral and just 11% expect a positive impact.
• CRE Fundamentals: Expectations firmed on balance. Thirty-seven percent expect improving fundamentals (occupancy, rents, NOI), 53% expect no change, and 11% expect deterioration – a negative tail half the size of 1Q26's 22%.
• Transaction Activity: Investor demand expectations moderated but remain net positive. Forty-two percent expect increased demand for CRE and multifamily assets over the next 12 months (47% no change; 11% less demand), down from 61% in 1Q26.
• Financing Demand: Borrower demand saw the most significant decline of the nine core questions but remains net positive. Forty-five percent expect increased borrower demand for CRE and multifamily financing (42% no change; 13% less), down from 71% in 1Q26.
• Market Liquidity: Liquidity expectations stabilized after 1Q26's caution. A large majority (71%) expect no change, while 24% expect improved liquidity – up from 20% – and just 5% expect worse conditions, down from 23%.
• CMBS and CRE CLO Outlook: Views on CMBS and CRE CLO demand and spreads firmed. Thirty-seven percent expect a positive impact – up from 33% in 1Q26 – while half (50%) are neutral and 13% expect a negative impact, down from 18%.
• Overall Industry Sentiment: Sentiment consolidated at neutral. Sixty-eight percent hold a neutral outlook for CRE finance businesses, while 24% are positive and just 8% are negative – a smaller negative tail than 1Q26's 22%.

Additional Topical Insights:

The survey's topical questions point to a market whose central preoccupations have rotated from geopolitical shock toward interest-rate uncertainty, regulatory capital, and the changing structure of CRE credit.

Asked which rate-related factor will most constrain CRE lending and investment in the second half of 2026, respondents split almost evenly between rate volatility and uncertainty about the path (47%) and the level of rates staying higher for longer (45%). Hedging and rate-cap costs, wide lender spreads, and the view that rates are not the binding constraint drew 3% each. Taken together, 92% of respondents identified either the level or the volatility of rates as the binding constraint on activity in the second half of 2026.

On how banks will deploy capital into CRE debt over the next 12 months, half (50%) expect banks to grow back-leverage and repurchase ("repo") lines to private credit and debt funds, while 37% expect banks to expand direct loan originations to regain market share. Only 8% expect banks to stay defensive with flat-to-declining CRE allocations. The result points to a change in the channel through which bank capital reaches the market – increasingly financing nonbank lenders – rather than a retreat from CRE credit.

With roughly 28% of SASB loans reaching their 2026 maturities having refinanced to date, according to J.P. Morgan research, respondents were split on what the widespread reliance on loan extensions signals. Twenty-nine percent see deferred distress – extensions masking losses that will surface later – while 26% view extensions as a temporary bridge until rates and values stabilize, 24% as a lasting borrower preference for low-cost extensions over refinancing, and 21% as constructive resets increasingly paired with paydowns or new equity. The dispersion suggests that the industry has not yet settled on whether the extension wave is a warning sign or a workout succeeding.

On the multiyear question of artificial intelligence and office demand, half (50%) expect AI and automation to drive a modest reduction in corporate office space requirements concentrated in specific sectors, while 29% expect a roughly neutral net effect as efficiency gains are offset by headcount growth and new uses. Thirteen percent expect a significant net reduction across multiple industries, and 8% expect a net positive as AI-centric firms expand and favor premium space.

Asked which policy or regulatory issue is most likely to affect CRE debt availability over the next 12 to 24 months, respondents pointed first to bank capital rules for CRE, including securitization risk weights (36%), followed by insurance-company capital treatment (31%) and the capital treatment of warehouse, repo, and back-leverage facilities (22%). GSE multifamily loan caps and mission requirements (8%) and state or local housing, tax, or land-use policy (3%) trailed.

Open-ended commentary reinforced the rotation in focus. First-quarter 2026 commentary centered on geopolitical shock and rate volatility. This quarter's responses emphasized regulatory capital and credit mechanics – potential scrutiny of bank back-leverage, insurance capital treatment, underwriting quality in multifamily conduit structures, and instances of inadequate property insurance coverage – alongside political uncertainty heading into the midterms and 2028 election cycles. The refinancing tone improved, with one respondent noting that the refinancing "curtain" has finally stopped moving and that borrowers have accepted the current rate environment.

Lisa Pendergast, President and CEO of CREFC, commented:

"After last quarter's shock, this is what a market catching its breath looks like. The index is back near its baseline, and our members have moved to the middle – neutral was the most common answer on seven of nine core questions. That is not complacency; it is discipline. Demand for financing remains net positive, liquidity is steady, and the questions our members are focused on – capital rules, underwriting standards, and how bank capital reaches the market – are the right ones for this stage of the cycle. What the second half of 2026 needs most is rate clarity."

About CREFC and the Board of Governors Sentiment Index:

The CRE Finance Council (CREFC) is the trade association for the over $6 trillion commercial real estate finance industry with a membership that includes more than 400 companies and 19,000 individuals. For over 30 years, CREFC has promoted liquidity, transparency, and efficiency in the commercial real estate finance markets, acting as a legislative and regulatory advocate for the industry, playing a vital role in setting market standards and best practices, and providing education for market participants.

The Board of Governors consists of senior executives representing every sector of the commercial real estate lending and mortgage-related debt investing markets, including balance-sheet and securitized lenders, loan and bond investors, mortgage bankers, private equity firms, loan servicers, rating agencies, attorneys, accountants, and others.

CREFC's BOG Sentiment Index, launched in 2017, tracks quarterly shifts in commercial real estate finance sentiment through nine equally weighted core questions, supplemented by topical questions that are not factored into the index. Blank responses are excluded from question denominators, and percentages may not sum to 100% due to rounding. The 2Q26 survey achieved a 95% response rate with 38 of 40 BOG members participating.

For more information about the 2Q26 BOG Sentiment Index and the full survey results, please click here or contact Raj Aidasani at [email protected].

SOURCE CRE Finance Council