Commercial real estate (CRE) owners hoping for relief from elevated borrowing costs may find themselves disappointed. Interest rates remain high, with little indication of a swift decline.

Key Figures: The 10-year Treasury yield, a primary benchmark for CRE debt, has climbed by 100 basis points since the Federal Reserve began easing monetary policy in September 2024. Analysts caution that meaningful rate relief is unlikely without a recession. Furthermore, the Fed projects just two 25-basis-point rate cuts in 2025—far fewer than market participants had anticipated.

Challenges for Loan Extensions: With $1.5 trillion in loans set to mature this year—including $5.4 billion in commercial mortgage-backed securities (CMBS) maturing in October—borrowers who postponed refinancing are under increasing pressure. High-leverage properties are particularly at risk, leading some owners to secure current rates to avoid future uncertainty.

Inflationary Concerns: Potential policy changes, including Donald Trump’s return to the presidency, proposed tax cuts, and tariffs, could exacerbate inflationary pressures. While markets have already accounted for some risk, unexpected developments may drive additional volatility.

The Bottom Line: The era of historically low interest rates appears to be over. Analysts emphasize that current rates represent a return to historical averages, urging investors to recalibrate their expectations. As one expert noted, “The days of sub-3% mortgages are behind us—it’s time to adapt to the new reality.”