Sprinkles of optimism, but mainly frustration, filled the air May 6 during Commercial Observer’s National Finance Forum. Inside the The Metropolitan Club of New York in Midtown Manhattan, some of commercial real estate’s biggest names held court to discuss the state of the industry on the heels of the recent economic upheaval caused by President Donald Trump’s tariff policy.
The morning opened with Lauren Hochfelder, co-CEO of Morgan Stanley Real Estate Investing, chatting with Jen Morgan, partner at law firm King & Spalding, and giving her assessment of commercial real estate capital markets.
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Hochfelder noted that during the first two months of 2025, liquidity had come back into the system, transaction volume was up, the cost of capital was down (at least relative to recent years) and, most importantly, conditions on the ground set the stage for a CRE recovery.
And then April 2 brought Liberation Day: President Trump’s unprecedented global reciprocal tariff policy. The stock market temporarily tanked and real estate transactions have basically frozen in place, according to Hochfelder.
“It’s like that line from “The Godfather”: ‘Just when you thought you were out …,’” she said. “So there’s a lot of volatility, a lot of uncertainty in the system, which is hard for real estate, like every asset class.”
Liberation Day has caused chaos, Hochfelder said, but certain structural patterns remain in place, namely the increasingly aging population of 73 million baby boomers. She noted that the population of those 80 years or older is expected to grow by 50 percent over the next decade.
“We don’t know what will happen with tariffs today, or with interest rates, but we certainly know our population is getting older, and that has profound impacts on the type of real estate we’ll need over time,” she said. She noted that senior housing is an asset class that tends to use floating-rate debt, where Morgan Stanley has seen historically high wide yields and has the ability to buy below replacement cost.
Hochfelder also emphasized how important supply chains are to real estate, and specifically how the supply chains of the last 20 years won’t be the supply chains of the 2030s and 2040s, creating an opening for investment into industrial assets.
“The increased frequency and severity of event-driven supply shocks have really taught companies they need to have options,” she said. “So tariffs are one more proof point that companies need these options … and, when you think about what industrial real estate is, it’s the infrastructure that enables those supply chains.”
The next symposium was hosted by Jay Neveloff, chair of Kramer Levin’s real estate practice. The discussion involved some of the market’s top participants giving their national financial and capital markets outlook.
Kristin Khanna, managing director at Barclays, said many deals that closed five years ago are in maturity defaults, opening space for balance sheet lending to fill the void in the marketplace through either recapitalizations and new financings.
“We’re seeing some very solid balance sheet opportunities, but to your point it’s cautious: We’re considering basis, how we’re writing cash flows, both in terms of the revenue side and the expense side,” Khanna explained. “Still, we think it’s a good time to be lending, and we’re trying to put out money.”
Deutsche Bank’s Mrinal Dansingani, part of the firm’s CRE special situations group, pointed out that the U.S. is a large country with different submarkets. Therefore, forces driving delinquencies in one asset class — multifamily, for example — are due to a combination of factors, such as a large loan pool in San Francisco defaulting, or lending into Sun Belt portfolios not finding the anticipated rent growth in those markets, whereas other multifamily markets might be doing better for completely different reasons.
“The flip side is to look at New York City — it’s a very tight market, everything is going well,” Dansingani said of multifamily. “There’s real divergence in performance, and you can’t even say it’s broadly thematic — there’s certain pockets of distress and certain pockets which perform very well.”
Eric Ramirez, head of Eastern region originations at Acore Capital, shared that his private credit firm is mostly active in the multifamily and industrial spaces this year, with some interest in hospitality. The biggest players generally all have their eyes on the same transactions, he said.
“We’re active today, and it’s no secret everyone is chasing the same deals,” said Ramirez. “It’s either 15 of us show up to the same thing, or you have to drag us kicking and screaming.”
Eastdil Secured Managing Director Grant Frankel largely agreed with this sentiment, noting that over the last six months asset classes like retail have attracted investment attention, along with specific office buildings with high-quality sponsors and attractive vintage.
“It’s sort of the haves and the have-nots,” said Frankel. “But for the assets being left behind, it’s an upside-down capital structure, where there’s capital to fix it but a lack of willingness from the lender to fix it.”
The third panel of the morning, moderated by Leo Leyva, co-chair at law firm Cole Schotz, largely concerned the battle for market share and the different financial sources leading that fight.
Morris Betesh, founder and managing partner at Arrow Real Estate Advisors, pointed out that commercial mortgage-backed securities (CMBS) started the year as an extremely attractive financing option because, unlike banks and agencies, CMBS lenders weren’t limited by debt service coverage ratio, but by debt yields. Betesh said the strategy plays better in a high interest rate environment — at least prior to Liberation Day.
“That market got completely disrupted by the April tariffs announcement, so spreads on CMBS loans have gapped out by 75 basis points,” explained Betesh. “It changed the environment of the marketplace, where banks, insurance companies and agencies have now become a lot more competitive:”
Yorick Starr, Invesco’s managing director, spoke to this stiff competition, as regional banks, insurance companies (particularly their debt platforms) and debt funds have all gone after the same assets his firm has been targeting in recent years,
“If you look at our book, for the last two to three years it’s 90 percent multifamily and industrial,” said Starr. “It’s what everyone is chasing.”
Chris Niederpruem, managing director and group head at First Citizens Commercial Real Estate, emphasized the competitive nature of the marketplace, which has changed dramatically in the last 12 months, especially as life companies and CMBS lenders compete with banks and for multifamily loans.
“We show up for deals that we like and there are 10 to 15 to 20 bids, and then a unicorn bid at the end that comes through at some ridiculous pricing or advancement,” he said. “It’s gotten very competitive really quickly.”
But even if deal flow is a dogfight, the silver lining is the sheer amount of liquidity in the system.
“Liquidity is strong as long as you know where to look for it,” said Joe Shanley, head of acquisitions at Haven Capital. “I’m not finding you can’t build full capital stacks: You’re still finding some debt funds, some CLO lenders willing to kick the can … but I feel like that’s thinning out, and, if you know where to look, there’s deals to get done.”
Taking a relatively contrarian approach, Frank Sorrentino, chairman and CEO of ConnectOne Bank, argued that, despite the current economic volatility, the U.S. is on the verge of “one of the most bullish markets we’ve ever seen” due to a confluence of factors.
Sorrentino pointed to how the Federal Reserve has been shrinking its balance sheet between $70 billion and $100 billion per month, with the goal of shrinking by $3 billion total, in turn decreasing liquidity in the system and creating challenges for balance sheet lenders. But despite the liquidity challenges, oil prices are coming down, employment is tight, GDP is growing, consumers are spending, and the entire housing market — condos, rentals and homes — is experiencing a generational supply crunch,
“We just can’t build enough to replace what needs to be put into the economy, so all those things start to add up,” said Sorrentino. “But there’s a lot of macro events that are occurring that slowly over time will probably create one of the most robust economies we’ve ever seen.”
The next session featured a fireside chat with Siddharth Shrivastava, managing director in investment banking at Goldman Sachs, who noted that the year began strong from a lending prospective with $39 billion of CMBS financing in the first quarter, putting it on pace to exceed 2021’s output prior to interest rates rising. Shrivastava added that balance sheet lending and acquisition activity also picked up in the first three months of the year prior to Trump’s April 2 tariff announcement.
While the tariff uncertainty slowed CRE volume in April, Shrivastava stressed that CMBS spreads are around where they were on April 2 after widening by about 15 percent in the week following that date. He said balance sheet lending is also continuing at a “robust pace” with the S&P 500 largely back to where it was before the Liberation Day mayhem.
“All signs are telling us that the market is back, but it doesn’t feel that way,” said Shrivastava during a one-on-one discussion with Krystyna Blakeslee, partner at Gibson, Dunn & Crutcher. “People are being very cautious because they don’t know what is going to happen next.”
Shrivastava noted that deal activity may pick up again in the next couple of months prior to July 10, when a 90-day pause on higher targeted tariffs for most countries lapses, since waiting carries more market risks. Looking beyond this year, Shrivastava stressed that 2026 will pose plenty of challenges given the debt on a number of multifamily acquisitions made in 2021, when cap rates were in the 3.5 percent to 4 percent range, will be maturing.
“I think in many of those cases, unless rates come down dramatically or spreads come down, they will be very hard to refinance,” Shrivastava said.
That the higher-for-longer interest rate environment will add complexity to many deals was the focus of the next panel, “Recalibrating the Capital Stack.”
Jordan Casella, managing director of capital markets at Walker & Dunlop, emphasized that there are plenty of opportunities to deploy rescue capital, mezzanine debt or preferred equity, but stressed that it remains challenging for lenders to find the right opportunities at returns they find appealing.
“We’re seeing real competition and true competition in terms of pricing,” Casella said. “From a supply and demand perspective, I think it is tilted a little bit toward the borrower or the subordinate piece of the capital stack.”
The capital stack panel — moderated by Jason Stratmoen, partner in the real estate department at Paul Hastings — also featured Cierra Taylor, vice president in real estate private credit at Cerberus Capital Management; Robert Rothschild, senior vice president in investment at InterVest Capital Partners; and Brad Bitting, managing director at developer Post Brothers.
Rothschild said he is in the market with several construction loans now, where interest reserves have been “tapped” to provide preferred equity. He said that while sponsors may not like the cost of bringing preferred equity into deals, the strategy will become more necessary in the near future, in particular for multifamily debt nearing maturity at higher interest rates requiring senior lenders to de-leverage.
For borrowers, knowledge is power when considering which lenders and capital providers to align with, Rothschild said.
“If you’re a borrower, you’re doing a large deal and somebody comes with a one-stop solution, then it’s your responsibility as a borrower to not just necessarily take that face value, but to understand how that lender is planning to capitalize the transaction,” Rothschild said. “The last thing you want is borrowers to be left at the altar and be traded at the last minute.”
The increased need for gap financing in today’s volatile markets was a big focus of the event’s final panel. Drew Fletcher, president of Greystone Capital Advisors, said that agency originations are getting priced with shorter duration periods due to elevated interest rates, resulting in more preferred equity involvement in those deals.
“We’ve been spending a lot of time on building out a very deep, robust stable of subordinate debt providers that are approved to provide preferred equity formats and some more limited circumstances behind newly originated agency paper,” Fletcher said. “That’s been really effective in helping borrowers get to a last dollar that’s palatable to allow a transaction to happen.”
The last panel of the finance forum — moderated by Mark Fawer, partner at Greenspoon Marder — included Maxwell Wu, co-founder and CEO of Fulcrum Lending; David Friedman, executive vice president, chief credit officer and head of non-agency production and syndications at Arbor Realty Trust; Rachel Davis, senior vice president of partner management and origination at Petros PACE Finance; and Adam Solomon, director in the real estate credit group at Midcap Financial.
Davis stressed the role commercial property accessed clean energy (C-PACE) lenders like Petros can play in helping borrowers with looming maturities.
“I would say that probably every other deal that we see today is a scenario where we can come in and refinance probably up to 40 percent of the cost of the project, and so that’s a meaningful paydown to that loan,” Davis said. “These aren’t bad projects — it’s just a matter of what’s going on in the world and things taking a little bit longer and they just need more runway.”