Commercial lending exec says the 10-year Treasury surge has made it almost impossible for assets to trade
The US real estate market is in a prolonged holding pattern, with rate instability suppressing transaction activity – and that’s equally the case in the commercial sector, where that trend is forcing owners into difficult decisions about assets they can no longer refinance at viable levels.
With geopolitical and financial market uncertainty rumbling on, that pressure isn’t set to lift any time soon, according to Peachtree Group managing principal and chief executive officer Greg Friedman (pictured top).
He told Mortgage Professional America the ongoing bond market volatility had made it exceptionally difficult for buyers and sellers to find common ground.
“It’s definitely been a challenging year, but it’s also started to create a lot of opportunities,” he said. “We’ve really leaned into doing a lot of direct lending and buying a lot of debt from banks and other financial institutions. And there’s been a tremendous amount of opportunity for us.”
Dramatic moves in the 10-year Treasury have grabbed headlines for their impact on average 30-year fixed residential mortgage rates, but they’ve also put severe downward pressure on asset valuations across the commercial sector and effectively locked up the transaction market. The yield has climbed approximately 100 basis points since the end of 2025 – a move that has repriced risk across the board and left many deals that looked viable a year ago now impossible to execute.
Waiting for the 10-year to settle
Friedman said the critical question is not where the 10-year yield sits today, but whether it can stabilize. He sees a calmer rate outlook as the prerequisite for any meaningful recovery in deal flow and said without it, owners and investors can’t underwrite acquisitions or dispositions with sufficient confidence to act.
“Until we have a more predictable rate environment, it’s very hard for owners and investors in real estate to be able to proactively acquire and sell assets and have a very fluid transaction market,” he said. “It’s hard to have a very fluid transaction market until you have a more predictable rate environment.”
The market choppiness that’s characterized the past two years will likely continue well into 2027, Friedman said, impacted in part by the outcome of the November midterm elections. How Washington’s balance of power shifts will have direct implications for fiscal policy, regulation, and ultimately the rate environment that commercial real estate is struggling to navigate.
But he also sees a real difference between how commercial real estate assets are performing operationally and how they’re faring from a financial standpoint. Across most major property types, demand has held up and new supply remains limited – the strain is concentrated on the financing side, not the fundamentals.
“It’s not necessarily a performance issue at the asset level,” he said. “It’s more of a balance sheet issue across commercial real estate because commercial real estate is so sensitive to movements in long-term rates as well as even short-term rates.”
Office’s slow road back
Office remains the sector most scarred by the pandemic era, when stay-at-home orders saw scores of businesses shutter their doors and usher in a remote-work revolution. Companies have been gradually ramping up return-to-office efforts since then, and Friedman sees reasons for cautious optimism. That’s particularly apparent in well-located buildings with strong tenants, although the recovery has been far from speedy.
“Office is slowly recovering,” Friedman said. “There are certain office properties that are probably never going to recover, but the ones that are recovering or that are well located, you’re seeing them slowly fill up and get demand.
“We’re seeing some opportunities in the office side, especially on the lending side where you’re able to lend at very attractive levels with buildings that have good long-term tenants in place.”
Owners who financed assets at lower rates are now confronting a refinancing market that looks nothing like the one they borrowed in – and the wave of commercial loan maturities cresting in 2026 is forcing some to sell, others to seek gap capital, and some to hand back the keys entirely.
Certain participants in the commercial market sector might be struggling to stay afloat in the current environment, but Friedman said investors and lenders positioned to move on distressed commercial assets may have some unusually productive times in store. Peachtree Group’s own direct lending push and debt acquisitions from banks reflect a deliberate strategy to capitalize on exactly that kind of dislocation.
“There’s no question that there’s going to be a lot of pressure on commercial real estate in 2026, just with all the loan maturities,” he said. “But it’s going to continue to be a very fragmented market as we continue to absorb and recalibrate to this higher-for-longer, long-term interest rate environment.”
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