CMBS in 2026: Why Conduit Lending Deserves a Second Look
For a few years, CMBS was almost a dirty word. Borrowers who had lived through the pain of special servicing, inflexible loan modifications, and rising spreads during 2022-2024 were understandably cautious about re-entering the conduit market. But the CMBS market of early 2026 looks meaningfully different from the one that frustrated borrowers two years ago. For certain deals, it now offers the most competitive execution available.
At Barrow Street Advisors, we have been placing a growing share of client transactions into CMBS over the past two quarters. Here is what has changed, and why we think borrowers should reconsider this capital source.
A Market That Has Found Its Footing
CMBS issuance in 2025 exceeded $100 billion, roughly double the 2023 total and approaching pre-pandemic levels. The first quarter of 2026 has continued that momentum, with several large conduit deals pricing well and spreads compressing to levels not seen since early 2022.
Several factors are driving the recovery:
The result is an all-in coupon for CMBS conduit loans that is genuinely competitive with bank and life company alternatives.
Current CMBS Pricing and Terms
For borrowers evaluating CMBS right now, here is what the typical conduit loan looks like:
Compared to life company quotes on similar deals, CMBS is pricing within 25-50 basis points on many transactions. The higher available leverage (65-70% vs. the typical 55-60% from insurance companies) can make a meaningful difference to equity returns.
When CMBS Makes Sense
Not every deal belongs in a CMBS execution. But several common scenarios make conduit lending the strongest option.
Maximizing proceeds on stabilized assets. If you need 65%+ LTV on a stabilized property and want long-term fixed-rate debt, CMBS is often the most efficient path. Banks will typically cap at 60-65% LTV, and life companies rarely exceed 60%. CMBS fills the gap with competitive pricing.
Portfolio diversification. Borrowers who rely heavily on bank relationships for their entire portfolio carry concentration risk. Adding CMBS debt to the capital structure diversifies your lender base and ensures that a single bank's credit committee tightening does not cascade across your holdings.
Non-recourse preference. CMBS loans are non-recourse, with standard carve-outs for "bad boy" acts like fraud and environmental liability. For borrowers who want to limit personal or corporate exposure, this is a significant advantage over recourse bank financing.
Rate certainty. CMBS offers true fixed-rate execution. Banks may offer fixed-rate quotes through interest rate swaps, but those structures carry additional complexity and counterparty risk. A CMBS fixed-rate loan is straightforward by comparison.
The Trade-Offs Borrowers Must Understand
We would be doing our clients a disservice if we glossed over the well-known limitations of CMBS. These are real, and borrowers should account for them.
Servicing rigidity. Once your loan is securitized, your relationship shifts from the originator to a master servicer (and potentially a special servicer if issues arise). Getting a lease consent, a property substitution, or a loan modification requires working through a process that is slower and less flexible than a direct bank relationship. This has improved somewhat with the growth of single-asset, single-borrower (SASB) CMBS deals, but conduit loans remain inherently less flexible post-closing.
Prepayment penalties. CMBS defeasance can be expensive and time-consuming. Yield maintenance, the alternative, can also carry significant costs if rates have fallen since origination. Borrowers who may need to sell or refinance before maturity should model these costs carefully before committing.
Closing timeline. CMBS loans typically take 60-90 days to close, longer than a bank facility. The securitization process requires rating agency involvement, extensive third-party diligence, and bond market timing. Borrowers on tight closing schedules need to plan accordingly.
Reserve requirements. CMBS lenders typically require funded reserves for taxes, insurance, tenant improvements, and capital expenditures. These reserves tie up cash that would otherwise be available to the borrower. The amounts are not always negotiable, though an experienced advisor can push for more favorable terms.
SASB vs. Conduit: Knowing the Difference
Larger borrowers should also be aware of the growing SASB market. Single-asset, single-borrower deals are structured around a single property or portfolio and offer several advantages over traditional conduit pools:
For institutional-quality assets with straightforward business plans, SASB execution can deliver some of the tightest pricing in the market. We have seen several recent SASB deals on Class A multifamily and industrial portfolios price inside of where comparable bank fixed-rate quotes landed.
Our Approach
When evaluating CMBS for a client, our team runs a parallel process that typically includes CMBS conduit quotes alongside bank, life company, and debt fund proposals. This ensures we can present a genuine apples-to-apples comparison and advise on the right execution for the specific transaction.
We also pay close attention to the loan documents. CMBS loan agreements are heavily negotiated, and the difference between a well-structured deal and a poorly negotiated one can be significant in terms of operational flexibility, reserve requirements, and default triggers. Having an advisor who has closed hundreds of CMBS transactions matters here. Small drafting points, like the definition of "cash management trigger" or the thresholds for property release provisions, can have outsized consequences during the loan term.
If you are approaching a refinancing, acquisition, or recapitalization and want to understand whether CMBS is the right fit, contact Barrow Street Advisors. Our team can walk you through the current market and structure a competitive process tailored to your transaction.