KBRA Credit Profile (KCP) was in attendance for the opening day of the Commercial Real Estate Finance Council’s (CREFC) annual June conference in New York City, which hosted nearly 1,200 attendees. Audiences listened as industry leaders discussed the challenges and opportunities facing commercial real estate (CRE) within the current macroeconomic environment.
The conference began with opening remarks from Elaine McKay and David Schell, co-chairs of the 2025 conference. They previewed the agenda and keynote speakers, before passing the mic to Daniel Olsen—CREFC Founders Award recipient—to present this year’s 20 Under 40 class, celebrating rising leaders in CRE finance and recognizing the next generation of industry innovators. Following the opening remarks, Ian Bremmer, President and Founder of Eurasia Group and GZERO Media, delivered the Day 1 keynote: Navigating Geopolitical Uncertainty. Mr. Bremmer identified three key structural forces driving global instability: post-Soviet Russia's exclusion from the West; China’s emergence as a powerful, centralized, and authoritarian nation with increased economic state control; and U.S. domestic disillusionment with elite-led institutions. Bremmer emphasized that these long-term shifts—not transient electoral cycles or individual political leaders—are driving the transition from a U.S.-led globalization model toward a more fragmented system.
Bremmer noted that trade tensions remain elevated, with U.S. tariffs and combative diplomacy reshaping global economic relationships. While countries like Mexico have largely acquiesced under U.S. pressure, large economic powers such as China and the European Union have shown some resistance and opted for strategic patience. Nonetheless, tools such as unilateral tariffs remain available to Trump and U.S. leadership, with limited judicial and institutional constraints.
On security, NATO appears more unified, bolstered by expanded membership and increased European defense spending. Still, Bremmer warned of long-term European instability due to fiscal and productivity challenges. He also noted shifts in U.S. foreign policy; Russia is now met with more skepticism than accommodation and a U.S.-Iran deal now looks more likely, driven by Iran's weakened position amid Hezbollah’s setbacks. Looking ahead, Bremmer emphasized that artificial intelligence (AI) and post-carbon technologies will shape future outcomes. The U.S. currently leads in AI, while China leads in energy innovation. This duality means globalization is not in decline but evolving under new constraints in a multipolar world, lacking a singular global leader. Although the U.S. remains economically dominant, Bremmer cautioned that unchecked kleptocracy and institutional erosion pose risks to U.S. credibility and its ability to lead by example on the global stage.
Investment-Grade Bondholders Forum
This session opened with a discussion on the evolution of the commercial mortgage-backed securities (CMBS) market, marking a shift in momentum from a conduit-focused structure to one increasingly shaped by single-asset single borrower (SASB) and growing CRE collateralized loan obligation (CLO) issuance. This structural change has introduced significant collateral differentiation across SASB transactions and a more nuanced, deal-specific approach to analyzing spreads. Although commodity office assets are still expected to take substantial write-downs, panelists noted that the sector has undergone a meaningful reset. New office SASB deals are now structured with lower leverage supported by strong, well-capitalized sponsors. The panel highlighted the resilience of the CMBS market amid tariff-related uncertainty, attributing its stability in part to the substantial “dry powder” held by investors earlier this year. However, one panelist cautioned that CMBS may present a misleading impression of liquidity, citing limited deal transparency and the proportional rise in SASB issuance, which has come at the expense of conduit deals that traditionally provide broader diversification.
Sentiment around CRE CLOs remained broadly positive, with panelists citing the alignment of interests between sponsors and investors. One participant noted the relative value of CRE CLOs over conduit spreads, although concerns were raised about declining credit enhancement on senior bonds in the face of rising risk, which has prompted some investors to move higher up the capital stack.
Panelists addressed the rising volume of maturity defaults concentrated in the office sector and Class B/C regional malls. Excluding office, roughly 60% of maturing loans have been successfully refinanced. By loan balance, approximately 25% of conduit loans have been modified. One panelist noted that the market is preemptively pricing in anticipated maturity extensions for loans unlikely to pay off. This extension risk has driven some investors away from SASB deals, which provide less clarity regarding extension limits, creating uncertainty around bond duration. One panelist stressed the importance of utilizing the servicer’s Q&A for increased transparency.
Finally, participants highlighted the issue of credit rating migration and noted that 87% of 2011-16 vintage BBB bonds have been downgraded, despite minimal realized losses. While this presents potential ratings arbitrage opportunities for non-investment grade buyers, this also poses challenges for ratings-constrained investors. These investors are pushed further up the capital stack, making investment-grade CMBS increasingly difficult to position and market relative to other fixed-income products.
Young Professionals Roundtable
This panel provided a dynamic and candid forum for early-career professionals to share insights on market sentiment, career development, and lessons learned from recent market cycles. The moderator encouraged participants to speak from personal experience, emphasizing the importance of developing a unique perspective and actively steering one’s career path. The session opened with live polling on interest rate expectations, revealing that most attendees anticipate flat or rising rates through 2026. Many young professionals reflected on having entered the industry during periods of heightened volatility, citing challenges of navigating a CRE market shaped by persistent uncertainty.
The conversation turned to the lingering impact of prior issuance booms, with several panelists noting that historically low rates may have temporarily undermined underwriting discipline. That leniency has come into sharper focus amid mounting refinancing challenges and a growing inventory of distressed assets. Panelists shared firsthand accounts of restructuring troubled office loans and collectively agreed that future career success hinges on applying lessons learned, while not relying on outdated frameworks. The group also explored how AI is leveraged, both personally and institutionally, to boost productivity.
Issuers Forum
The next session of the day was the Issuers Forum, which provided a comprehensive view of CMBS issuance trends, origination challenges, and evolving investor preferences. Panelists characterized the start of the year as notably strong, with issuance activity rebounding following a temporary slowdown in April, largely attributed to geopolitical tensions and U.S. tariff uncertainty. SASB issuance—particularly in the office sector—has been a standout, reaching a record volume of approximately $36 billion. Office SASB deals accounted for roughly 30% of all SASB transactions to date, eclipsing the historical average of 17%-18%. Conversely, hotel transactions underperformed expectations due to changes in sentiment driven by declining foreign travel to the U.S. Floating-rate structures remain dominant, representing two-thirds of SASB issuance, underscoring investor preference for flexibility amid persistent interest rate uncertainty. Although lagging behind SASB issuance, the $14.5 billion in conduit issuance year-to-date (YTD) aligns with historical averages. Origination activity remains constrained by sustained market uncertainty and the expectation of prolonged elevated interest rates. While five-year fixed rate conduits remain in favor, issuers expressed interest in returning to predominantly 10-year terms.
Panelists spoke to the various asset classes, stating that multifamily has faced mounting pressure due to recent defaults, tax complications, and extreme weather events. Office underwriting standards have tightened, requiring stronger borrower profiles, higher equity contributions, and early collaboration with B-piece buyers. Panelists also noted softening industrial fundamentals amid rising costs and shifting global supply chains. Regardless, the CMBS market was described as broadly healthy and functional. Borrowers are increasingly seeking quotes for both CMBS and balance sheet debt to maintain optionality and flexibility. The issuers emphasized the value of stable, long-term B-piece investor participation, noting that a balance between competition and stability in this space is critical for navigating future credit cycles.
Funding the Alternative Lender Universe: Warehouse Financing & CRE CLOs
The panel opened with a discussion regarding anticipated losses on CRE bridge loans, particularly those securitized in CRE CLOs. Given realized losses are first absorbed by an issuers’ equity positions, managers remain incentivized to repurchase and work out troubled assets through scratch-and-dent warehouse lines, reinforcing alignment between issuers and bondholders. Much of the current stress traces back to 2022 vintage loans amid rising interest rates, costlier-than-expected rate cap renewal agreements, and slower business plan execution. The panel expects distress to ease once this cohort of loans is resolved, aided by newer CRE CLOs backed by near-stabilized collateral from stronger sponsors, as opposed to heavy value-add scenarios. Repo lines were described as a complementary, short-term tool for financing clean or lightly stressed loans, but their daily mark-to-market discipline makes them less suitable for deeply impaired assets.
Investors welcome loan buyouts, yet one speaker noted that opaque reporting on loss severities hinders risk modeling. In addition, there was concern over whether buyouts were sustainable given the likely stress on issuer liquidity. A panelist in the issuance space stated it was unlikely that the details of warehouse line workouts would become public; however, they expect a greater reliance on in-trust modifications, which are cheaper than par takeouts and supported by CRE CLO structures that tolerate a limited level of defaults before overcollateralization tests fail. Panelists also highlighted that competitive warehouse lines now offer higher advance rates with softer mark-to-market triggers, effectively functioning as “balance-sheet CLOs,” giving issuers additional flexibility to manage collateral through resolution cycles. The pullback of banks from direct CRE lending has opened the door for new warehouse providers, increasing competition and giving bridge lenders greater funding options.
Despite market volatility, demand for CRE CLOs remains strong. The group agreed the relatively shallow pool of CRE CLO bond investors will deepen as reporting standards continue to improve. Monthly reporting and acquired loan information shows signs of improving, while there is a push for tabular data in quarterly manager disclosures. These enhancements should allow for better underwriting and attract cross-sector investors, such as corporate CLO buyers.
GSE/Multifamily Lenders Forum
The GSE Multifamily Forum featured representatives from Freddie Mac and Fannie Mae, who provided insights into current lending volumes, borrower behavior, and investor sentiment. Freddie Mac reported over $40 billion in loans funded YTD, noting that it anticipates reaching its $73 billion annual cap. Panelists noted continued borrower appetite for five-year fixed rate loans, which accounted for approximately 40% of production in 2025, down from 50% last year. In response to growing investor demand for longer duration, both Agencies are placing greater focus on expanding seven- and 10-year loan originations, although borrowers remain hesitant to lock in longer-term rates, given persistent market uncertainty.
Panelists pointed to a temporary dip in the 10-year Treasury yield below 4% in April as a key driver that helped unlock new origination activity, prompting optimism and expectations of a strong Q4. While refinancing continues to dominate deal flow, transaction volume has shown modest improvement, although it still trails 2019 and 2021 levels. While borrowers continue to value the certainty offered by Agency financing, debt service coverage ratio (DSCR) constraints have prompted some borrowers to pursue alternative capital sources. Investor appetite remains strong as stable spreads are appealing relative to other mortgage products. While no major product changes are expected this year, Freddie Mac is expanding its Mortgage Participation Certificate (PC) program. One panelist succinctly stated that “everything can change tomorrow” when asked about what to expect in 2H 2025.
CREFC & Trepp Insurance Company Investment Performance Survey
Before the Portfolio Lenders Forum, the results of the semiannual insurance company portfolio lenders survey were shared. Life company and other portfolio lenders continue to pivot toward interest-only (IO) loan production. Across newly originated mortgages, about 69% are full-term IO and 13% are partial-term IO. In addition, loan sizing is reportedly loosening, with a shift toward higher loan-to-value (LTV) ratios, and lower debt yields among loans between $25 million and $50 million. Realized loss severities were more modest in 2024 relative to 2023, with recent write-offs concentrated in office. Nonperforming loan sales are accelerating, but a large-scale sell-off of highly distressed office assets has yet to hit the market.
CMBS issuance accelerated in late-2023 and 2024 with office returning as the largest asset class at 29% of volume, attributed to higher-quality New York office securitized in shorter-term SASB transactions. Default rates remained elevated with non-Agency CMBS carrying a 7.08% delinquency rate in May 2025, a notable increase from 4.97% in May 2024, with the office sector at 10.59%. Banks reported a noncurrent rate of 1.59% as of Q1 2025, up three basis points (bps) from December 2024, but well below the office-specific rate of 11%. Meanwhile, delinquency rates improved slightly to 0.55% for portfolio lenders, reflecting tighter underwriting and proactive modifications.
Portfolio Lenders Forum
This panel opened with a discussion of the U.S. real estate investment trust (REIT) market, which panelists described as a useful leading indicator for private real estate valuations. Since 2010, the REIT landscape has undergone a dramatic transformation with office, malls, and apartments—once representing over 50% of total market capitalization—now accounting for a significantly smaller share. In contrast, sectors like data centers, net lease assets, and self-storage have experienced substantial growth in market share. Despite robust demand for data center space, the sector returned -4.1% YTD, largely due to concerns surrounding DeepSeek and news that Microsoft was relinquishing a portion of its data center footprint. Overall, REITs continue to trade at a 13% discount to net asset value (NAV), with traditional property sectors still trading 100 bps to 200 bps below private appraisals based on implied capitalization rates.
One panelist noted that the portfolio lending space remains highly competitive, particularly for deals under $200 million. To compete with alternative lenders, portfolio lenders are increasingly relying on more creative loan structures. One panelist observed that lenders have grown more adept at navigating loan modifications since 2024, resulting in faster and more effective workouts. Borrowers are increasingly coming to terms with the reality of lower asset valuations and higher interest rates. Lenders are also seeing improved takeout activity and are cautiously optimistic that transaction volume will improve as markets adjust to higher interest rates.
The Data Boom: Investment & Financing Strategies for Data Centers
The last panel of the day focused on how the rapid expansion of AI, machine learning, and cloud computing are driving growth in the data center sector. As demand continues to surge, especially in Tier 1 markets like Northern Virginia, power limitations are pushing developers into emerging Tier 2 markets. Hyperscale facilities, which are critical for AI and cloud computing, are highly site-specific and demand massive power capacity. Developers must align with utility companies and local communities early to secure long-term power agreements and access. Leasing dynamics continue to evolve, with longer lease terms of 15 to 20 years becoming more common alongside landlord-driven triple net leases. Strong demand has supported low vacancy rates, currently hovering around 2%.
Despite positive trends, panelists noted several issues facing the sector, including constraints on power availability, land entitlement hurdles, and community resistance. Further, panelists see a rising need for takeout financing in the near term, given the substantial wall of maturities looming in 2026.
Historically, issuers have utilized asset-backed securities (ABS) structures to finance data centers, which offered flexibility within a master trust. While the use of CMBS to finance data centers has increased, ABS and CMBS each provide sponsors with different considerations, including financial and operational flexibility, pricing, and availability of capital. CMBS lending has catered better to hyperscale facilities, which present more idiosyncratic risk.
KBRA will provide recaps of Day 2 and Day 3 as the conference continues.