Market Update

Author

Steven Speck
February 20, 2026

Market Update

Hey there,

It’s easy to hear headlines but they can be misleading, get caught up in groupthink, and not really apply to real life.

Here’s a snippet from an industry newsletter we receive daily, with our commentary. i.e. how well does this apply to what we’re seeing across Ohio vs what we hear at conferences across the US.

CRE Lenders Shift From Extensions to Enforcement

After years of “extend and pretend,” CRE lenders are pulling the plug—triggering a surge in defaults, especially in office.

By the numbers: Office CMBS delinquencies hit a record 12.34% in January, the highest since 2000. About $25B in loans are past maturity, and more than half of the nearly $100B coming due this year are unlikely to refi on time, per Morningstar DBRS.

Why now: Since rates jumped in 2022, many lenders extended ultra-low-rate loans, betting conditions would improve. That wager is fading. Refinancing costs are often 300+ bps higher, leaving some borrowers unable to close the gap—and opting to walk away.

Structural shift: Lenders now see office distress as structural, not cyclical. Hybrid work has reduced demand, dragging down values and rents in cities like Portland and St. Louis, leading to more foreclosures, “zombie” buildings, and deferred investment.

Case in point: Brookfield’s $515M loan on part of the former New York Times building—extended five times since 2020—has moved to special servicing after missing maturity, as the property prepares to lose a major tenant.

Banks in the crosshairs: U.S. CRE debt totals nearly $5T, with banks holding about 36%. While major banks have sidestepped major fallout, regional lenders are entering what some call the “peak of distress.”

Not all doom and gloom: Industrial assets and grocery-anchored retail continue to show resilience, supported by steadier demand. CMBS issuance also rebounded to $125.6B in 2025, up 21% YoY—the strongest annual volume since before the financial crisis.”

Our Take:

  1. Deal flow is substantially higher than 2024 & 2025, starting around November/December 2025.

    1. The quality of deals being offered is increasing (good locations, good condition).

    2. Extreme valuation expectations by sellers are coming down (Bid/Ask spread has narrowed to where things will trade not sit).

    3. Northwest Ohio has been steady; values have continued to rise since 2022. We have not seen the 20% pullback that the Southwest has.

  2. Distress is significantly higher in the Sunbelt. 

    1. Though there are distressed deals (we’ve seen a few in NWO, Fort Wayne, and Columbus) the majority of distress is in Texas, the Carolinas, and Florida.

    2. Distress in NWO is mainly from poor operations, in bigger markets, such as Columbus, Fort Wayne, Indianapolis, we’re seeing more distress from debt resets.

  3. Cap Rates

    1. Strong for sellers

    2. For Columbus: 6 - 6.5 on trailing (*Generalized, Class B/C good area)

    3. For NWO: 7 - 7.5 on trailing (*Generalized, Class B/C good area)

  4. Big buyers still love the Sunbelt; they settled for the Midwest in 2024, but have no long-term plans to stay in the Midwest. More dealflow in 2026 may pull them away as competition.

*Cap rates are quick and imprecise tools to measure. They will vary. There is more that goes into determining the value of a property.

Questions always welcome!

Nate & Steven
Rust Belt Capital, LLC

Disclosure:
Rust Belt Capital, LLC is not a Registered Investment Advisor. Investing involves risk, including loss of principal. Past performance does not guarantee or indicate future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. While the data we use from third parties is believed to be reliable, we cannot ensure the accuracy or completeness of data provided by investors or other third parties. Rust Belt Capital, LLC does not provide tax advice and does not represent in any manner that any outcomes described herein will result in any particular tax consequence. This is not an offer to buy or sell any security. Offers to sell, or solicitations of offers to buy, any security can only be made through official offering documents that contain important information about investment objectives, risks, fees, and expenses. Prospective investors should consult with a tax, investment, or legal adviser before making any investment decision. Distributions or profitable investments cannot and are not guaranteed. Not intended to be tax advice and should not be solely relied upon to make an investment decision.