Commercial real estate borrowing costs stalled as Term SOFR fell just 4 bps, marking the smallest quarterly drop in two years.
Term SOFR averaged 3.62% in Q2 2026, declining only 4 bps from the prior quarter after four consecutive quarters of sharper drops. The flattening trend signals a pause in borrowing cost relief for commercial real estate markets.
The benchmark had fallen 70 bps over the past year but showed minimal movement in Q2, reflecting the Federal Reserve’s pause on rate cuts. Fixed-rate senior short quotes rose 28% as borrowers shifted away from floating-rate products, while total quote volume dipped 4% to 1,794.
All-in borrowing rates across property types slipped just 4 bps, a sharp slowdown from the 10 bps decline in Q1. Treasury yields remain above year-ago levels, further limiting rate relief for borrowers.