Why Refinancing Is Recovering Faster Than Sales
Credit is returning, but pricing gaps persist. Loan maturities will test which owners can keep waiting and which must sell.
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Commercial real estate owners are finding it easier to replace a mortgage than to agree with a buyer on what their property is worth. That’s helping refinancing recover faster than sales and allowing improving liquidity and delayed repricing to coexist.
First American Financial’s second-quarter 2026 analysis puts the gap in perspective. Across five major property types, refinancing volume reached $137 billion, up 19 percent year-over-year and 53 percent above the 2016-2019 quarterly average. Sales totaled $120 billion, up 15 percent from a year earlier but still about 6 percent below their pre-pandemic benchmark.
The divergence signals that credit is available for many owners, but it doesn’t establish that their equity has recovered or that they could sell at a price they would accept. Refinancing can preserve ownership while leaving that disagreement unresolved.
“An owner can decide to wait another year before selling a building,” said Ian Arguno, head of analytics at commercial real estate intelligence platform and marketplace Realmo. “When the mortgage comes due, the lender gets a vote.”
As loan maturities arrive, the distinction becomes consequential. Properties that support replacement debt can remain off the market. Those that need additional capital will test both the sponsor’s resources and the lender’s willingness to provide more time.
What refinancing leaves unresolved
For owners facing weak leasing conditions and lower exit valuations, refinancing or extending a loan offers an alternative to selling into an unfavorable market. Debt markets are more open than equity markets, according to Jeff Evans, president of Volta Capital, giving some sponsors room to wait for a better exit.
Real estate also faces competition for investment capital. Jaime Sturgis, CEO of brokerage company Native Realty, sees allocations to AI, other technology investments and financial markets drawing money that might otherwise have gone into properties. That competition adds another obstacle to a sales recovery, while refinancing offers a way to keep these assets off the market.
For borrowers able to secure replacement debt, the additional time can represent progress: an opportunity to complete lease-up or improve operations before selling. But refinancing can also allow a sponsor to defer accepting a lower value, particularly if the investment case depends more on a future market recovery than on changes at the property.
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The pickup in refinancing reflects both improving credit availability and owners’ reluctance to sell, according to Xander Snyder, principal & commercial real estate economist with First American Financial. Lenders are returning to origination and some banks are loosening requirements, giving owners who remain reluctant to sell more options to replace maturing debt.
That willingness to lend does not mean buyers and sellers have reached agreement on value. A property may qualify for a new mortgage while remaining difficult to sell at a price its owner will accept.
Rob Bergeron, owner & realtor at Winner Realty, put it succinctly: “A refinance isn’t a price.” Sales that eventually occur will establish new comparables, he said, potentially at levels existing owners will find difficult to accept.
The equity check sets the limit
The ability to wait depends partly on how much debt a property can replace and whether the owner can cover the shortfall.
Consider a hypothetical building generating $1 million in annual net operating income. At a 5 percent capitalization rate, it is worth $20 million. At a 6.5 percent cap rate, with income unchanged, its value falls to approximately $15.4 million. A replacement loan at 65 percent loan-to-value would provide about $10 million, leaving an owner with $13 million outstanding to contribute roughly $3 million before fees.
That calculation assumes the property also meets the lender’s debt-service requirements. A modest improvement in borrowing costs may help, but it does not automatically eliminate the gap created by a lower valuation.
Owners can bring in a partner, contribute cash or negotiate an extension. The difficult cases arise when replacement proceeds fall short and the sponsor can’t put in more money, Arguno said. An adequately operating building can therefore face a capital problem without first suffering an operating collapse.
Extensions have kept some of those situations from becoming sales. But lenders’ tolerance is diminishing, particularly for troubled property subtypes and sponsors without the liquidity to support a recapitalization.
“I think the maturity wall pressure will indeed force more properties into sales,” Evans said. “But extensions and recapitalizations will continue to prevent a deluge of properties from hitting the market en masse.”
Snyder similarly expects insufficient cash flow and approaching maturities to compel more owners to act, while lenders’ preference for negotiated solutions will slow the process. Some loans also carry built-in extension options that are beginning to run out.
The result is likely to be a staggered adjustment. Bergeron believes that some owners who are unable to fund a paydown will sell through private or off-market transactions, rather than a conspicuous wave of public listings.
Sales are clearing selectively
The sales that are closing show where buyers and sellers can reach agreement, but headline volumes reveal little about properties that remain unresolved.
Realmo’s analysis of recorded industrial, office and retail sales from July 1 through Sept. 15, 2026, illustrates that selectivity. Its sample covers transactions from $30,000 to below $50 million, excluding specified duplicate and multi-parcel records.
Industrial accounted for more than $8 billion, or 42.1 percent of recorded dollar volume, despite representing 30.1 percent of the records. Retail generated $6.35 billion and the highest transaction count, while office contributed nearly $3.9 billion.
Activity was geographically concentrated, too. California and Florida accounted for a combined 31.5 percent of Realmo’s recorded dollar volume and led sales across all three property types. Illinois ranked third in industrial, while New York was third in office and retail.
Even though this demonstrates that properties continue to trade, it provides a view of a select segment of the market rather than a comprehensive measure of recovery because the sample excludes larger transactions and other property types.
Hotel investment offers another example of why aggregate activity needs qualification. JLL recorded $5.6 billion in U.S. hotel transactions in the first quarter of 2026, with several large luxury sales helping drive the increase. Those transactions fall outside both the period and property types covered by Realmo’s analysis.
A strong luxury sale does not establish the financing prospects of an older hotel facing substantial renovation costs. The same distinction applies within office, retail and industrial: A sector can attract capital while particular buildings remain difficult to finance or sell.
Where maturities meet capital needs
The next investment opportunities are most likely to emerge where a debt deadline coincides with an operating shortfall or a large expenditure. The maturity creates urgency, while the property’s remaining capital needs determine whether a lower purchase price offers a viable entry point.
Evans sees potential in hospitality, as well as self storage and multifamily projects from the 2021-2022 development boom in oversupplied markets. Some lease-up assets are performing below projections as floating-rate debt comes due. For those owners, waiting requires funding both the financing gap and the period before income stabilizes. Office presents a different combination of pressures. Older, smaller suburban buildings without competitive amenities may require a change of use or an owner-user rather than another landlord, Bergeron said.
Yet a troubled asset does not become an attractive acquisition simply because its value has fallen. Sturgis believes some suburban office pricing still fails to reflect occupancy risk. Long-term capital may find an appealing basis, but buyers need the resources and flexibility to remodel the property.
That adaptation has its own cost. In Chicago, Melanie Zimmerman, owner & realtor at MVP Chicago Real Estate, sees potential in older office buildings and underperforming street-level retail where renovation and leasing can improve results. The acquisition price must leave room for that work, which can be expensive locally.
Arguno’s approach is to examine the maturity alongside the next major claim on cash. An office tenant’s departure can bring downtime and tenant-improvement costs. An industrial building may need power, loading or layout upgrades to compete for occupiers. Retail requires scrutiny of tenant affordability and lease expirations, while hotel buyers must account for renovation requirements and earnings after staffing and other operating expenses.
“The opportunity is in buying at a price that leaves enough money to address those problems,” Arguno said. “A large discount from the previous valuation tells me very little if the repairs consume all the savings.”
That’s also the test of whether today’s refinancing is creating a stronger position or merely postponing a sale. More time has value when it allows income to stabilize, leasing to improve or necessary work to be completed. Its value is harder to establish when the plan requires a return to an earlier valuation without a corresponding improvement in the building’s economics.
As maturities work through the market, the next deals will emerge where owners and lenders can no longer bridge that difference. A broader recovery will depend on buyers and sellers reaching prices that account for both current income and the capital still required.
“I would feel more confident about the recovery when those numbers become easier to reconcile without assuming that next year will fix everything,” Arguno said.
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