Arizona Commercial Real Estate Debt Report, Q4 2026

Key findings

1. Long-term rates are much higher than a year ago, and short-term rates are lower. The 10-year Treasury was 5.09% on Oct 16, 2026, up from 3.99% on Oct 16, 2025 (+110 bp). Over the same period SOFR fell from 4.30% to 3.88% and bank prime fell from 7.25% to 7.00%. (FRED DGS10, FRED SOFR (NY Fed), FRED DPRIME (Fed H.15))

   Fixed-rate permanent loans, which are priced off 5- and 10-year Treasuries, cost more. Floating-rate bridge and bank loans, which are priced off SOFR or prime, cost a little less. The 5-year Treasury was 4.89% on Oct 16 (FRED DGS5).

2. Cap rates on Arizona apartments are now at or barely above the 10-year Treasury.
   • Phoenix multifamily averaged a 5.17% cap rate in Q2 2026 (Matthews). That is about 8 bp over the 10-year.
   • Tucson multifamily averaged about 5.5% (Northmarq Q2 2026), about 41 bp over the 10-year.
   • Phoenix Class A traded near 5.0% in Q1, below today's 10-year. Class C traded at 6.5% to 7.0% (Northmarq).

   On stabilized Class A deals, fixed-rate debt can cost more than the property yields (negative leverage). Lenders then size loans by DSCR or debt yield rather than LTV.

3. CMBS distress hit a five-year high. Trepp's U.S. CMBS delinquency rate rose to 8.02% in September 2026, the highest since November 2020. By property type, office was 12.16%, multifamily 8.04% (up from 6.59% a year earlier), retail 6.58%, lodging 6.18% and industrial 1.14% (Trepp, Sept 2026). These figures are national. Trepp does not publish an Arizona-only rate.
4. 2026 is a heavy maturity year. $875 billion, or 17% of the $5.0 trillion in outstanding U.S. commercial mortgages, is scheduled to mature in 2026, and another $652 billion in 2027 (MBA, Feb 9, 2026).
   • By property type, 30% of hotel loans, 23% of industrial loans and 13% of multifamily loans come due.
   • By lender type, 21% of depository balances, 25% of CMBS/CLO balances and 29% of credit-company and other balances come due.
5. Lending volume is recovering. MBA's Q2 2026 originations index was up 16% year over year and up 12% from Q1 (MBA Q2 2026).
   • By lender type, CMBS originations rose 68% and depositories rose 61% year over year. GSE volume fell 17% and life company volume fell 27%.
   • By property type, retail rose 61%, office 47%, hotel 19%, multifamily 8% and industrial 6%.

5. What we're seeing on Arizona deals

These are Capital Market Funds observations. They are individual transactions, not a market average or a rate quote. Terms depend on the property, the sponsor and the market at the time. Capital Market Funds arranged the loans. It is not the lender.

• Tucson value-add multifamily: we arranged a life company loan at 5.75%, interest-only, for up to 80% of total project cost.
• Peoria six-bay auto service center: we arranged a credit union loan at 6.25% and 65% LTV.
• Timing: our typical close is 70 to 90 days from application.

6. Takeaways for Arizona owners

• Run any 2026 or 2027 maturity against today's 5-year and 10-year Treasuries, not the rate on the existing loan.
• Debt service coverage, not LTV, is setting loan size on lower-cap-rate assets.
• Compare all the capital sources: banks, credit unions, life companies, CMBS and debt funds. In Q2 their volumes moved in opposite directions.

Methodology

• Rates are daily FRED observations as of Oct 16, 2026.
• Market data comes from the most recent free public reports, with each one cited where it is used.
• Every figure is national unless it is labeled Arizona, Phoenix or Tucson.
• The four charts are the ones prepared for this report. Phoenix industrial cap rates cited secondhand are not in the charts.

Capital Market Funds, LLC - CBK-2007014 - Commercial Mortgage Banker. NMLS 1445066. Craig Hoebing · Capital Market Funds · (480) 495-8072 · craig@capmarkfund.com · 7373 E Doubletree Ranch Rd #255, Scottsdale, AZ 85258 · https://capmarkfund.com

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