This is Deal Junkie. I’m Michael, it is 8:30 AM Eastern on Friday, December 19, 2025. Here’s what we’re covering today: an overview of interest rates, insurance costs, and lending conditions shaping commercial real estate; the latest national news on capital markets, deal activity, and signs of stress or recovery; and a regional spotlight on Dallas–Fort Worth’s booming market.
Interest Rates & Lending: The financing climate for commercial real estate is finally improving as we close out 2025. The Federal Reserve delivered its third straight rate cut this month, bringing the benchmark federal funds rate down into the mid-3% range – a big drop from the 5%+ highs we saw a year ago. For borrowers, that’s translating into modest relief: commercial mortgage rates are broadly lower than earlier this year, with many banks now quoting loans in the high-5% range instead of the 7% or more we saw over the summer. It’s not a return to cheap money by any means, but deals that didn’t pencil out at 7% might start making sense at 5.8%. Crucially, long-term borrowing costs remain sticky – the 10-year Treasury yield is still hovering around 4.1% – so while financing is cheaper than it was a year ago, it’s still relatively expensive compared to the ultra-low rates of the 2010s. The Fed is signaling it may pause further cuts for now, so borrowers shouldn’t bank on dramatically lower rates overnight. But the direction of travel has been positive, and lenders are slowly regaining confidence. In fact, some big players are jumping into the credit space: Blackstone, for example, just teamed up with a partner on a $1 billion program to fund small-balance commercial mortgages. And Nuveen recently raised over $600 million for a debt fund targeting transitional real estate loans. These moves show private capital is eager to fill financing gaps, which is good news for dealmakers.
On the insurance side, 2025 brought a bit of stability after a turbulent few years. Commercial property insurance premiums had been surging since 2020 – in disaster-prone areas like coastal Florida or California wildfire zones, some owners saw their insurance costs double. This year, however, the market has steadied. Insurers have returned to writing policies more actively outside the highest-risk regions, and for many well-managed properties the rate increases have leveled off or even ticked down slightly. If your buildings are in a low-risk location with strong safety measures, you might actually get a flat renewal after years of steep hikes. That said, coverage in hurricane and wildfire zones is still a pain point: carriers continue to demand higher deductibles and stricter terms to offset the risk. Overall though, compared to the chaos of 2023, the insurance outlook heading into 2026 is more balanced – a welcome breather for operating budgets and lenders alike, since manageable insurance costs make underwriting new loans easier.
National Market Update: Across the country, commercial real estate is showing early signs of a rebound amid this easing financial backdrop. Let’s start with transaction activity. After a very slow first half of the year, investment sales roared back in the third quarter. Big-ticket deals – those over $10 million – jumped by nearly 50% from Q2 to Q3, according to industry data. That’s the strongest quarterly surge in years and a clear signal that investors are coming off the sidelines. Volume is still below the peak frenzy of 2021, but it’s a marked improvement from the deal drought of late 2022 and early 2024. What’s selling? Primarily multifamily, industrial, and high-quality retail properties. Those sectors held up best through the downturn and are drawing the most buyer interest now. Multifamily in particular remains in demand: despite concerns about oversupply in some Sun Belt cities, apartment values nationally have proven resilient. In fact, on average, multifamily pricing is slightly up compared to a year ago. By contrast, office assets are still a tough sell – office transaction volume and pricing are both deeply depressed. Even with some recent glimmers of hope in that sector (which I’ll get to in a moment), office buildings have a long road to recovery, and buyers remain very cautious unless it’s a prime, fully leased property at a bargain price.
Speaking of prices and values, the market seems to be finding its footing. Commercial property values overall have stopped falling and even notched small gains in certain areas. An index of deals across all property types showed pricing per square foot rising about half a percent last quarter – nothing huge, but notable because it’s the first uptick after several quarters of decline. It suggests that buyers and sellers are finally nearing consensus on where values should be in this higher-rate environment. Again, there’s a big split by sector: industrial properties and essential retail centers (like grocery-anchored shopping centers) are holding their value best, some even appreciating modestly this year. Apartment building values, as I mentioned, are stabilizing as well – many investors believe the worst of the rent slowdown is over and are looking ahead to an eventual return of rent growth as new construction cools off. On the other hand, office valuations continue to slide. We saw office prices drop another few percent in Q3, and they’re down well over 20% from pre-pandemic levels in many cities. The silver lining is that the pace of office declines has slowed, and there’s a sense that opportunistic investors are circling trophy assets in hopes of a turnaround or repurposing play. But for now, any stabilization in values is mostly outside the office sector.
What about the capital markets and distress? Well, we’re not out of the woods yet, but conditions are improving here too. Commercial lending had been very tight for the past year – banks pulled back, and the CMBS market (where loans are bundled into securities) was virtually frozen in late 2022. Now that picture is gradually changing. Securitized lending is inching back to life: new CMBS issuance has picked up recently as investors become more comfortable with the risk, and spreads have narrowed from their peak. We actually saw a couple of large single-borrower CMBS deals come to market this quarter, which would have been unthinkable a year ago. Meanwhile, banks and life insurance lenders are cautiously quoting new loans again, especially now that the Fed has eased off the brakes. We’ve heard of regional banks offering refinancing terms in the 6% range for solid deals – that’s still higher than borrowers want, but a lot better than the 8% or higher some faced when rates peaked.
Lending conditions remain selective, however. Lenders are favoring lower-leverage loans and strong sponsorship. If you need high leverage or have a weaker tenant profile, it’s still tough to get financing without bringing in mezzanine debt or more equity. A lot of property owners with loans maturing now are choosing to put in extra cash to pay down debt rather than refinance the full amount, because values dropped and lenders won’t lend as much as before. The good news is, each month that rates drift down, a few more of those refinancing scenarios start to work out instead of ending in default. And there are signs of life in the debt markets: debt funds and private lenders are actively hunting for deals, often stepping in where banks won’t. The mere fact that we’re talking about new lending programs (like that Blackstone initiative or other private credit funds launching) is itself a positive sign – it means capital is moving again.
Of course, we can’t discuss capital markets without acknowledging distress. There’s a backlog of troubled properties out there, especially offices and older retail centers, that are struggling with vacancies and high debt costs. Commercial mortgage default rates climbed through 2024 and hit uncomfortable levels this year. By the latest estimates, roughly 8% of all securitized commercial mortgages are delinquent, and if you include loans that are current but in special servicing (essentially on the watchlist or getting restructured), about 11% are in distress. That’s the highest distress rate we’ve seen in over a decade, though not quite a 2008-level crisis. Office properties make up a big chunk of these troubled loans – many downtown office towers are facing maturity defaults (where the loan comes due and they can’t refinance). We’re also starting to see some multifamily loans go bad in cities where there was overbuilding. For example, a huge apartment complex in Manhattan went delinquent this fall when its owner couldn’t refinance the mortgage, and in places like Denver and Austin, a wave of new luxury apartment supply has led to higher vacancies and some pain for developers who borrowed at low rates and now are squeezed by high interest costs. The expectation is that we’ll see more loan workouts and even foreclosures in the first half of 2026 as owners and lenders renegotiate terms. However, unlike the last crisis, there’s a lot of capital sitting on the sidelines ready to snap up distressed assets at the right price. Private equity funds, hedge funds, and even some institutional investors have been preparing for this moment. They’re essentially saying, “We’ll buy the note or the building if the bank needs out.” This safety net of opportunistic capital is one reason we haven’t seen an outright crash – prices adjust and those properties eventually trade rather than languishing.
Now, recovery signals are emerging that balance out that distress. Let’s talk about a few positive trends: First, the broader economy is holding up. Job growth has slowed, which the Fed actually welcomes to tame inflation, but we’re not in a recession. Unemployment is around 4.6%, and consumer spending is still fairly healthy. The holiday retail season is on track to set a new sales record (over $1 trillion by some forecasts), which bolsters the retail real estate sector. Malls and shopping centers that focus on experience or daily-needs retail are seeing solid foot traffic. In fact, retail real estate investment picked up this quarter – more retail space traded hands in Q3 than any quarter since 2022, as investors regain confidence in the shopping sector’s stability.
Next, here’s something I wouldn’t have predicted a year ago: office leasing is showing hints of a rebound, at least in the top markets. Companies have been slowly bringing workers back, and office attendance recently hit its highest post-pandemic level. Kastle Systems – the keycard tracking firm – reported that office buildings nationally averaged over 50% occupancy on weekdays for the first time since early 2020, and some cities like Miami are regularly above 60%. That’s still far from the old normal, but it’s progress. More importantly, demand for quality office space is real – tenants are upgrading to better buildings to entice employees to come in. We’re seeing this in New York and San Francisco especially: after years of rising vacancy, those markets saw positive net absorption recently. San Francisco’s office vacancy dipped slightly last quarter, and landlords there report more tours and even some tech companies expanding again. Manhattan had a few big leases signed in the past month that absorbed high-profile vacant space. It’s not a boom by any stretch, and secondary older buildings remain in trouble, but these green shoots suggest the office market is bottoming out in the prime locations. Additionally, some beleaguered office assets are finding new life through conversions – Washington D.C., for example, has been converting obsolete offices into residential units, which helped trim its office glut a bit and provided much-needed housing. All of this indicates the office sector is beginning to creatively adapt rather than just decline.
Another recovery sign: Real estate liquidity is improving. One index that tracks the ease of buying and selling property (created by Madison International Realty) has risen for six consecutive quarters. It’s now at its highest point since early 2022, which means investors feel more confident they can enter and exit deals. Part of this is due to the Fed’s policy shift – as soon as rate hikes stopped and cuts began, confidence started to creep back. The public markets mirror this too: REIT stocks have come off their lows and capital raises are happening again. Just this week, a couple of REITs managed to issue new equity or debt successfully, something that was virtually closed-off earlier in the year. We even see specialty sectors like data centers and life science labs attracting fresh capital thanks to long-term demand drivers. All in all, the capital flow is coming back, albeit carefully.
Regional Spotlight – Dallas–Fort Worth (DFW): Now, for our regional spotlight, we turn to what might be the country’s most dynamic real estate market right now: Dallas–Fort Worth. If it feels like we mention Texas a lot, it’s because so much is happening there, and DFW in particular has been on a tear. The Dallas–Fort Worth metro area is booming in almost every way – population growth, job creation, corporate relocations, and real estate investment. This momentum is turning DFW into one of the most influential markets in commercial real estate, and national firms have taken notice. In fact, a trend this year has been big outside companies snapping up local Dallas real estate players to establish a foothold. Let me give you a few examples: Colliers, one of the global brokerage giants, acquired a prominent multifamily investment sales team based in Dallas to bolster their presence. Another major firm, Cresa, just bought a local tenant representation brokerage (one with some star pedigree – it was originally tied to NFL legend Emmitt Smith) as part of its expansion in North Texas. Even beyond brokerages, we saw Stewart Information Services, a national title insurance company, acquire a Dallas-area property services firm. The strategy is clear – everyone wants to be in Dallas.
Why is DFW so hot? A few reasons stand out. One is the pro-business climate in Texas: lower taxes, fewer regulations, and a cost of living that’s attractive for companies and workers. That has fueled a massive wave of corporate headquarters relocations to Dallas. Since 2018, about 100 companies have moved their HQ to DFW – almost 20% of all big corporate moves in the U.S. That’s huge. When a company like Caterpillar or PGA of America (just to name two recent ones) moves to Dallas, it brings employees, demand for housing, need for office space, more flights at the airport – it’s an economic catalyst and it feeds the real estate market.
Another factor is DFW’s historic base of real estate talent and capital. This metro has long been home to heavyweights like CBRE (the world’s largest real estate services firm, which actually moved its headquarters to Dallas a couple years ago), Trammell Crow (a legendary developer), and many others. There’s a deep pool of investors and developers who know the market intimately. Add to that a bit of Texas swagger – you have high-profile figures like Jerry Jones (the Cowboys owner and a big real estate developer) and Mark Cuban (another investor) who are active in Dallas real estate. There’s a sense that deals get done in Dallas through relationships and local know-how, so an outsider firm often finds it easier to just buy a local team rather than start from scratch.
Then there’s the growth story: DFW’s population is still skyrocketing. It’s already the fourth-largest metro in the country and gaining fast. That means constant demand for new housing, warehouses, shopping centers, you name it. At the same time, Dallas is diversifying. It’s not just oil & gas or telecom anymore; it’s finance, tech, logistics, even entertainment. Fun fact: they’re launching a new commodities and stock exchange in Dallas (cheekily nicknamed the “Y’all Street” exchange) with aims to compete with New York’s financial markets. And major finance firms are setting up large operations there – Goldman Sachs is building a huge campus in Dallas, and Wells Fargo is expanding as well. This financial sector growth boosts the region’s clout and should keep capital flowing locally.
From an investment standpoint, DFW was just ranked the #1 market to watch in the Emerging Trends in Real Estate 2026 report (that’s a widely followed annual survey by PwC and ULI). It beat out all other U.S. cities for overall real estate prospects next year. And in 2025, Dallas led the nation in commercial property investment volume – roughly $18 billion of deals were done there, more than even New York or Los Angeles. We’re talking big trades in every sector: huge industrial portfolios, new office tower developments, massive master-planned communities, you name it. The takeaway is that Dallas–Fort Worth isn’t just a regional powerhouse; it has become a national bellwether for real estate. As one expert put it, if you’re in commercial real estate and you’re not in DFW, you might be late to the party. The market’s size, velocity, and future growth potential make it a proving ground for the industry. We’ll continue watching DFW’s evolution – from ‘Texas hot’ to perhaps an equal peer of the coastal giants – with great interest.
Wrapping Up: Bringing it back to the big picture, the end of 2025 finds the commercial real estate world in a cautiously optimistic place. We endured the pain of rising interest rates and a virtual standstill in dealmaking over the past two years. Now, at long last, borrowing costs are edging down and activity is picking up. There are still challenges ahead – a lot of debt to refinance, some markets facing oversupply, and an economy that’s rebalancing. But the mood has improved markedly from the gloom we had this time last year. You can feel that shift in conversations with investors and brokers: it’s no longer all doom and bust; people are talking about opportunities, about positioning for a recovery. 2026 won’t be without bumps – I expect we’ll see more distressed sales and maybe some high-profile defaults, especially in the office sector. However, there’s a general sense that the worst is behind us. Real estate, after all, is cyclical, and it looks like the cycle is turning up again.
That’s all for now, but we’ll be back tomorrow. Don’t forget to hit follow or subscribe and leave a review to help others discover the show. I’m Michael—until next time!