CREFC Sentiment Index Plummets to Three-Year Low on Rising Rate and…

Event summary

CREFC's BOG Sentiment Index fell 17.5% to 83.3 in 3Q26, the lowest since 3Q23.
All nine core questions weakened, with interest rate and economic outlook concerns driving 30% of the decline.
62% of respondents expect the U.S. economy to worsen over the next 12 months.
92% anticipate mortgage and cap rates will negatively impact CRE finance businesses.
CMBS delinquency rate expected to rise above 8% by year-end 2026.

The big picture

The CRE finance industry is facing its most pessimistic outlook in three years, driven by persistent inflation, fiscal deficits, and elevated long-term borrowing costs. The broad-based decline in sentiment reflects concerns extending beyond immediate Fed policy to structural economic challenges. With 62% of respondents expecting economic weakening, the sector braces for compounded strain on borrowers facing higher rates and maturing loans.

What we're watching

Economic Weakness: How a deteriorating economic outlook will affect CRE fundamentals, particularly occupancy and rents.
Rate Environment: Whether elevated long-term borrowing costs will persist despite potential short-term rate easing.
Market Distress: The pace at which CMBS delinquency rates rise and how it impacts refinancing risk.