New York – October 05, 2026 -- The CRE Finance Council's Board of Governors Sentiment Index dropped 17.5% to 83.3 in the third quarter of 2026, down from 101.0 in the prior quarter and its lowest reading since the third quarter of 2023 (82.7), as commercial real estate finance executives confront a 10-year Treasury yield stuck near 5%.

All nine core index questions weakened in lockstep

The decline left the index 34% below its record high of 126.6 set in the fourth quarter of 2024 and well under the survey's baseline of 100.0 established in the fourth quarter of 2017. Interest rate and economic outlook questions drove roughly 30% of the drop, with the remaining seven core questions accounting for the balance. The survey, conducted September 21-28, 2026, drew responses from 37 of 40 board members, a 93% participation rate.

Ninety-two percent expect rates to hurt CRE finance businesses

Ninety-two percent of respondents said mortgage and cap rates would weigh negatively on CRE finance businesses over the next 12 months, up sharply from 53% in the second quarter and the most negative rates reading since the third quarter of 2022, when 98% held that view.

Borrower demand turns negative for the first time since 2022

Twenty-four percent of respondents expect stronger borrower demand for CRE and multifamily financing over the next year, against 35% expecting weaker demand -- the first net-negative reading since the fourth quarter of 2022. Investor demand expectations split evenly, with 30% projecting more demand and 30% less, ending a positive tilt that had held since the second quarter of 2023.

Economic pessimism nearly triples quarter over quarter

Sixty-two percent of respondents now expect the U.S. economy to perform worse over the next 12 months, up from 24% in the prior quarter and the highest negative share since the first quarter of 2025. Overall industry sentiment also soured, with 38% negative on CRE finance businesses, up from 8%, while positive views fell to 11% from 24%.

Liquidity contraction fears quintuple from prior quarter

While 65% of respondents still expect unchanged CRE debt market liquidity, the share anticipating contraction rose to 24% from 5%. CMBS and CRE CLO outlooks also turned net negative, with 32% expecting demand and spread trends to weigh on performance, up from 13%.

Topical survey flags Treasury yield path and data center spreads

Asked where the 10-year Treasury yield would close on December 31, 2026, 78% of respondents expect 5.00% or higher, with no respondent forecasting below 4.50%. On CRE property prices -- up 0.2% year over year through July 2026 per MSCI -- 46% expect declines over the next 12 months. With CMBS delinquency at 7.85% in August 2026 per Trepp, 61% expect the rate to reach 8.00% or higher by year-end. On AAA-rated data center CMBS spreads, which traded around 165 basis points over benchmarks in mid-September versus 85 to 120 basis points for other property types per BofA Global Research, 41% expect further widening.

"This is the most negative our board has been in three years," said Raj Aidasani, Managing Director at CREFC. "Rates remain the clearest concern... but the decline runs well beyond rates. Our members' concerns now extend past the next Fed decision to inflation, fiscal deficits and the outlook for long-term borrowing costs."