CREFC's 3Q 2026 BOG Sentiment Index Falls 17.5% to a Three-Year Low as Caution Spreads Across All Nine Core Questions
CREFC's 3Q 2026 BOG Sentiment Index Falls 17.5% to a Three-Year Low as Caution Spreads Across All Nine Core Questions
Mon, October 5, 2026 at 3:00 PM UTC
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NEW YORK, Oct. 5, 2026 /PRNewswire/ -- The CRE Finance Council (CREFC), the trade association for the commercial real estate finance industry, today released its Third-Quarter 2026 (3Q26) Board of Governors (BOG) Sentiment Index survey results.
The index fell 17.5% to 83.3 from 101.0 in 2Q26, its lowest reading since 3Q23 (82.7), well below the survey's 4Q17 baseline of 100.0 and 34% below the record high of 126.6 set in 4Q24. The decline was broad-based: all nine core questions weakened quarter-over-quarter. The interest rate and economic outlook questions posted the largest declines and together accounted for roughly 30% of the drop, with the remaining seven questions contributing the balance.
Conducted from September 21 – 28, 2026, the survey captured a market adjusting to a 10-year Treasury yield at 5%, roughly a full percentage point above its level a year earlier, even as the federal funds rate sits a quarter point lower. Neutral remained the most common answer on seven of the nine core questions, but the share of negative responses increased on eight of the nine. The survey consists of nine equally weighted core questions and five topical questions, which are not factored into the BOG Index. Ninety-three percent of the BOG responded to the 3Q26 survey.
Demand-side readings weakened further, with borrower demand turning net negative and investor demand losing its positive tilt. Twenty-four percent of respondents expect stronger borrower demand for CRE and multifamily financing over the next 12 months versus 35% expecting weaker demand, the first net-negative reading since 4Q22. Investor demand expectations are evenly split, with 30% expecting more demand and 30% expecting less. Most respondents (65%) still expect unchanged liquidity, but the share expecting a contraction rose to 24% from 5%.
Key Highlights from 3Q26 Index Core Questions:
Economic Outlook: Economic expectations deteriorated sharply. Sixty-two percent now expect the U.S. economy to perform worse over the next 12 months, up from 24% in 2Q26 and the highest share since 1Q25. Thirty-five percent expect the same and 3% expect improvement, down from 18%.
Federal Policy: Policy optimism faded rather than reversing. Only 11% expect a positive impact from federal legislative and regulatory actions, down from 26%, while 65% expect a neutral impact (47% in 2Q26). The negative share edged down to 24% from 26%.
Interest Rate Impact: Rates are the weakest core reading for a second consecutive quarter, and by a wide margin. Ninety-two percent expect mortgage and cap rates to weigh negatively on CRE finance businesses, up from 53% in 2Q26 and the most negative rates reading since 3Q22 (98%). Five percent are neutral and 3% expect a positive impact.
CRE Fundamentals: Expectations turned net negative for the first time since 1Q25. Thirty percent expect fundamentals (occupancy, rents, NOI) to worsen, up from 11%, while 22% expect improvement (37% in 2Q26) and 49% expect no change.
Transaction Activity: Investor demand expectations are no longer net positive for the first time since 2Q23. Thirty percent expect increased demand for CRE and multifamily assets over the next 12 months, down from 42%, while 30% expect less demand (11% in 2Q26) and 41% expect no change.
Financing Demand: Borrower demand expectations turned net negative for the first time since 4Q22. Twenty-four percent expect increased demand for CRE and multifamily financing, down from 45%, while 35% expect less demand (13% in 2Q26) and 41% expect no change.
Market Liquidity: The negative tail widened. Sixty-five percent expect no change in CRE debt market liquidity (71% in 2Q26), while 24% expect a contraction, up from 5%, and 11% expect improvement, down from 24%.
CMBS and CRE CLO Outlook: Views turned net negative. Thirty-two percent expect CMBS and CRE CLO demand and spread trends to weigh on performance, up from 13% in 2Q26, while 22% expect a positive impact (37% in 2Q26) and 46% are neutral.
Overall Industry Sentiment: The negative share nearly quintupled. Thirty-eight percent are negative on CRE finance businesses over the next 12 months, up from 8% in 2Q26 and the largest negative share since 1Q25, while 51% are neutral (68%) and 11% are positive (24%).
Additional Topical Insights:
This quarter's topical questions focused on the rate path and its consequences for values, credit terms, delinquency and the newest large CMBS collateral type, data centers.
Asked where the 10-year Treasury yield, at 5.00% on September 18, 2026, will close on December 31, 2026, 78% of respondents expect 5.00% or higher. The most common answer was 5.00% to 5.24% (41%), followed by 5.25% to 5.49% (30%) and 5.50% or higher (8%). Sixteen percent expect 4.75% to 4.99% and 5% expect 4.50% to 4.74%. No respondent expects a yield below 4.50%.
On U.S. CRE property prices, which were up 0.2% year over year through July 2026 according to MSCI, 46% expect declines over the next 12 months (38% a fall of 1% to 5%; 8% a fall of more than 5%). Thirty percent expect prices to change by less than 1% in either direction, and 24% expect a rise of 1% to 5%. No respondent expects prices to rise more than 5%.
On credit terms for new CRE loans, such as leverage, interest-only periods and lender protections, 38% expect tightening over the next 12 months (8% significantly; 30% modestly), while 43% expect terms to stay about the same and 19% expect modest loosening. No respondent expects significant loosening.
With the CMBS delinquency rate, including conduit and SASB loans, at 7.85% in August 2026 according to Trepp, 61% of respondents expect the rate to be 8.00% or higher on December 31, 2026, including 19% who expect 8.50% or higher. Thirty-six percent expect 7.50% to 7.99%, and 3% expect the rate to fall below 7.50%.
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Asked how spreads on AAA-rated data center CMBS, which paid about 165 basis points over benchmark rates in mid-September 2026 compared with 85 to 120 basis points for other property types according to BofA Global Research, will change over the next 12 months, 41% expect widening (27% modestly; 14% significantly), 38% expect little change, and 22% expect modest tightening. No respondent expects significant tightening.
Open-ended commentary shifted from the regulatory capital and credit-structure themes of 2Q26 to the long end of the Treasury curve. Respondents cited fiscal deficits, record Treasury issuance and persistent inflation, including energy and diesel costs, as forces that could keep long-term borrowing costs elevated even if short-term rates ease, with refinancing risk, CMBS spread widening and pricing pressure on office and multifamily as the expected consequences. Comments pointed to both continued refinancing demand as 2021–2022 and 2017 loan vintages mature and rising distress, particularly in office. Data center capital needs and political uncertainty ahead of the midterm elections also featured. Not all commentary was negative; respondents also pointed to continued CRE CLO growth and rising sales volume as owners accept current values.
Raj Aidasani, Managing Director, CREFC, commented:
"This is the most negative our board has been in three years. Rates remain the clearest concern: 92% expect mortgage and cap rates to weigh on CRE finance businesses over the next year, the highest share since the third quarter of 2022. But the decline runs well beyond rates. All nine core questions weakened, and the negative share rose on eight of them. Our members' concerns now extend past the next Fed decision to inflation, fiscal deficits and the outlook for long-term borrowing costs. The number to watch from here is the economy: 62% expect it to weaken over the next 12 months. If that view proves right, weaker rents and cash flow would compound the strain on borrowers already facing higher rates and maturing loans."
About CREFC and the Board of Governors Sentiment Index:
The CRE Finance Council (CREFC) is the trade association for the over $6 trillion commercial real estate finance industry with a membership that includes more than 400 companies and 19,000 individuals. For over 30 years, CREFC has promoted liquidity, transparency, and efficiency in the commercial real estate finance markets, acting as a legislative and regulatory advocate for the industry, playing a vital role in setting market standards and best practices, and providing education for market participants.
The Board of Governors consists of senior executives representing every sector of the commercial real estate lending and mortgage-related debt investing markets, including balance-sheet and securitized lenders, loan and bond investors, mortgage bankers, private equity firms, loan servicers, rating agencies, attorneys, accountants, and others.
CREFC's BOG Sentiment Index, launched in 2017, tracks quarterly shifts in commercial real estate finance sentiment through nine equally weighted core questions, supplemented by topical questions that are not factored into the index. Blank responses are excluded from question denominators, and percentages may not sum to 100% due to rounding. The 3Q26 survey achieved a 93% response rate with 37 of 40 BOG members participating.
For more information about the 3Q26 BOG Sentiment Index and the full survey results, please click here or contact Raj Aidasani at raidasani@crefc.org.
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SOURCE CRE Finance Council
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