The Federal Reserve’s second consecutive rate cut—25 bps to a 3.75–4.00% range—confirms a policy pivot but not yet a full easing cycle. The 10-year Treasury’s sub-4% dip immediately compressed CRE borrowing costs and opened a short-lived window for refinancing and debt-cap hedging. Transaction pipelines that had frozen through mid-year are moving again as investors regain price visibility. Yet Powell’s warning that a December cut is “far from certain” reminds markets that relief is conditional, not guaranteed.

Yields snapped lower before stabilizing around 4.1%, restoring roughly 70 bps of affordability versus early summer. The 30-year mortgage average slid to 6.17%, a 13-month low that is spurring refi applications and early rate-lock activity. CRE borrowers are capitalizing: lenders report a visible uptick in forward hedges and term-sheet circulation. Still, the Fed’s restrained tone keeps volatility risk alive. Inflation persistence or labor-market surprises could quickly retrace gains. For now, the window is open—but narrow.

September’s $42 billion in CRE trades marks a 19% YoY rise, the first meaningful recovery in deal volume since 2022. Office transactions jumped 42% as sellers met the market on price and buyers regained confidence that peak rates are past. Brokers cite “price discovery equilibrium” and a sharper bid-ask convergence. The Mortgage Bankers Association now projects $827 billion in 2024 originations, +24% YoY, as lower coupons improve debt service coverage. In practice, capital availability—not optimism—is now dictating velocity.

Banks remain cautious—Wells Fargo’s CRE book is down 8% YoY—but alternative lenders are expanding fast. Blackstone Credit alone drew $35.9 billion of Q3 inflows, powering a record $1.24 trillion AUM. Executives describe the “deal dam breaking,” as bridge and transitional loans replace retreating bank capital. Private-loan spreads have edged lower into 7–9% yields, still rich for investors yet cheaper for borrowers. Loss rates remain minimal (0.1%), underscoring disciplined underwriting rather than exuberance. The shift signals a structural re-intermediation of CRE credit.

CMBS and CRE CLO issuance is surging. Year-to-date private-label volume hit $127.5 billion (+39% YoY), while agency CMBS reached $119.7 billion (+36%). Investors are embracing yield: AAA tranches clear near +80 bps, BBB- at +475 bps. The absence of post-Fed spread widening shows confidence that policy easing will be gradual, not disruptive. Life insurers and debt funds are re-allocating to structured products, providing liquidity for the trillion-dollar 2025 maturity wall. Refinancing math is improving—but only for assets with credible cash flow and equity support.

With the 10-year near 4.0%, refinancing or hedging now carries strategic urgency. CRE360’s guardrails:

Rate relief is real but provisional. The Fed has loosened policy by 150 bps without declaring victory on inflation; therefore, financial conditions may stabilize rather than slide further. As capital costs compress, CRE financing will reward preparedness over optimism. Expect a measured uptick in Q4 transactions, led by refinancings and structured recapitalizations. In 2026, the balance of power will tilt toward lenders with flexible mandates and borrowers demonstrating cash-flow durability. Discipline, not exuberance, remains the differentiator.