Watch for a robust bridge lending market this year, as many lenders increase their 2026 origination volumes. Borrowers will see plenty of available bridge capital going forward, especially in the lease-up space for newly built assets. Capital and sponsors alike seem to think transaction velocity — particularly acquisitions — may see a resurgence in 2026, especially during the second half of the year. This may open the floodgates to increased bridge lending activity for deals that are transitional. There will be plenty of competition, which will lead to better terms for borrowers. Count on bridge lenders to offer lower rates, higher leverage and more relaxed guarantee requirements. Watch for SOFR to drop substantially at the beginning of the year with expectations for additional rate reductions throughout 2026. Many new bridge lenders have entered the market, which presents opportunities for bidding wars for well-conceived projects with strong sponsors. Banks and life companies will also be more active in the space this year. Bridge lenders could also start to consider more office deals as a way to grab yield.
Expect the most aggressive leverage in the multifamily and industrial space. With minimum debt yields as low as 7%, lenders will most likely land in the 70% to 75% leverage range, with some lenders being able to stretch to 80%+. Office deals will max at 65%. Pricing will be based on the business plan, market and loan size. Rates will be in the 9% to 12% range. Strong borrowers may secure sub-10% rates, while riskier deals push toward 13%. Look for pricing as low as the low to mid-200s for quality sponsors with well-located industrial and multifamily deals. Riskier deals, those with heavier value-add business plans or in less desirable markets, will see pricing start in the 300s to 400s. Non-construction bridge is generally around SOFR+ 300 to 350 basis points. Office deals will start at SOFR+ 450 basis points. As supply and demand fundamentals become clear, lenders will start to become more amenable to modest rent growth assumptions, whereas the trailing two- to three-years lenders seem to be underwriting today’s rents.
Look for BlackRock, Mesa West, Greystone, Avatar Financial Group, Affinius Capital, Brookfield, Blackstone, Starwood, KKR, Apollo, Ares, Kiavi, Conventus Lending, Renovo Financial, CV3 Financial Services, Merchants Mortgage & Trust, Arbor Realty Trust, MF1 Capital, Ladder Capital, LoanCore Capital, Ready Capital, Emerald Creek Capital, TPG Real Estate, ACRES Capital, BrightSpire Capital, LaSalle Debt Investors, Basis Investment Group, Obra Real Estate, BridgeInvest, Prime Finance, ACORE Capital, Benefit Street Partners, Thorofare Capital, Pensam Capital, Canyon Partners Real Estate, 3650 Capital, RRA Capital and A10 Capital to strive to compete. Banks such as Bank OZK and Banc of California, along with life companies including PPM America and Security National Commercial Capital, will also fund bridge loans this year.
Bridge lenders will look toward newly built assets, largely in the industrial, multifamily, retail, self storage, limited-service hotels and build-to-rent/SFR space. This allows lenders to put money into newly built assets without taking the initial construction risk. The hardest deals will be office and full-service hotels. There are high default rates in these asset classes, which make lenders concerned about repayment, although many believe the office sector has hit the bottom and is starting to rebound. Hotels in markets with strong demand drivers such as tourism or population growth will see bridge capital due to resilient fundamentals, predictable cash flows and easier exits. Look for some caution around oversupplied multifamily in Sun Belt submarkets due to low debt service coverage ratios, declining values and refinancing gaps from expired rate caps or higher costs.
Watch for the Sun Belt markets to remain a massive focus, including Texas, Florida, Charlotte, N.C., and Phoenix. Any market seeing positive net migration and job growth and without a lot of incoming supply will also be targeted. Look for more available capital in the Midwest and coastal markets, which are strong and stable. Bridge lenders may lend into strong economic markets with high supply on inventory for the best sponsors who can articulate a differentiation of their project. Bridge lenders will shy away from oversupplied Sun Belt cities, office-heavy areas such as parts of New York City and Chicago, and regions with high insurance/tax burdens or weak demand.
Lenders will look closely at the borrower’s strength and existing portfolio. Lenders will seek the standard net worth and liquidity requirements of 100% and 10%+, respectively; however, lenders can loosen their net worth requirements if there is strong sponsor liquidity. Credit scores of 600+ and strong exit strategies will be desired; pledges of equity interests or capital contributions may apply for added security. Aggregate liquidity of 5% to 10% of loan amount is desirable after the equity injection of 20% to 35%.
