Credit Spreads, Not Fed Policy, Driving CRE Market Dynamics Commercial real estate deal activity is increasingly constrained by credit spreads rather than Federal Reserve policy rates. Despite stable Treasury yields, lenders have widened spreads across major property types, raising all-in borrowing costs and limiting transaction proceeds. Banks and insurance companies remain selective with leverage, while only investor-driven lenders have modestly loosened standards. Average loan-to-value ratios have improved incrementally, but wider spreads have offset these gains, forcing buyers to add equity or reprice bids. Modest spread widening materially reduces loan proceeds, stalling deals not due to valuation disagreements but because debt economics no longer support legacy pricing. Market recovery will depend on lenders regaining confidence in risk pricing rather than rate cut timing.
