Commercial Real Estate Lenders Are Becoming Pros at Handling Market Disruption

In 2026, amid war, inflation and oil price shocks, several of our lenders spoke of the challenges they encountered. Chief among them? Interest rate increases on the short and long end of the curve. 

“The biggest challenge has been adapting to interest-rate volatility rather than simply adapting to higher rates,” said Stephanie Wiggins, head of agency and FHA production at PGIM. “A borrower can adjust to a 5 percent 10-Year Treasury if they believe that is the new reality, but it’s much harder when financing assumptions change materially during a transaction.”

The interest rate volatility has resized term sheets, hit proceeds, lowered valuations and slowed transaction activity in a year that was supposed to be defined by recovery (at least that’s what was assumed in January).

“While we started to see the market begin to recover from a transaction volume perspective earlier this year, elevated long-term interest rates have added headwinds to that recovery,” said Charlie Rose, CEO of Invesco Commercial Real Estate Finance Trust. “If this environment persists, we expect further pressure on property valuations and transaction activity.”

Chris Lawton, head of originations for Nuveen Green Capital, pointed out that the interest rate rise and ensuring macro-pressures — cue new Fed Chairman Kevin Warsh’s entrance — have increased financing costs and lowered deal volume, a phenomenon that has also scared normally eager equity investors who make capital stacks whole. 

“Activity is further constrained by the fact that common equity continues to be extremely difficult to obtain,” said Lawton. “These factors, combined with tight competition in the lending market, have been challenging.”

Even so, not all has been lost in 2026. 

Michael Lavipour, head of lending at Affinius Capital, noted that his firm spent most of 2025 shoring up problem loans, giving him and his team the clear runway to begin the year on a strong note. Affinius originated over $8 billion of loans from January to June, according to Lavipour.

“Despite limited investment sales activity, the 12 months ending June 30 were our most productive origination months since inception,” he added. 

And one man’s struggle is another’s success, as some lenders have used the volatility to pounce on underwater and opportunistic buying opportunities. (See Page 52.)

“Despite a more volatile and complex market backdrop, our business has continued to perform,” said Tim Johnson, global head of Blackstone Real Estate Debt Strategies. “As markets adjust to higher rates, geopolitical uncertainty and shifting risk sentiment, we believe periods of volatility often create some of the most attractive investment opportunities.”

Even so, several lenders pointed out that relationships, sponsor profile and asset fundamentals will continue to differentiate the deals that succeed from those that fall into trouble. 

“The biggest challenge has been maintaining discipline as competition increases,” said Chris Duey, head of private debt portfolio management at Principal Asset Management. “The recovery continues to vary meaningfully by property type, asset quality and market.”

Brian Pascus can be reached at bpascus@commercialobserver.com.