For the last few years, a large portion of commercial real estate survived on one thing: time.

Banks extended loans. Lenders delayed decisions. Sponsors hoped rates would fall fast enough to bail out weak capital stacks and overleveraged deals. Everyone kicked the can.

That phase is ending.

Now we’re starting to see what the real market actually looks like when debt has to be refinanced at today’s rates, today’s insurance costs, today’s operating expenses, and today’s realities.

And it’s getting ugly in certain sectors.

Office buildings continue to absorb the hardest blows. Older product in secondary locations is getting hit from every angle at once: declining tenant demand, rising operating costs, higher vacancy, expensive TI packages, and debt structures that no longer pencil. Distressed office sales are accelerating, and lenders are no longer as patient as they were eighteen months ago.

The shift matters because this isn’t just about buildings.

It’s about liquidity.

It’s about the banking system finally acknowledging losses that have been sitting beneath the surface for years.

And it’s about a reset in pricing expectations across the market.

We are now seeing lenders move from “extend and pretend” to forced resolutions:

• Loan sales at steep discounts
• Discounted payoffs
• Note sales
• Foreclosures
• Deed-in-lieu negotiations
• Forced recapitalizations
• Sponsors getting wiped out
• Equity becoming dead equity

A lot of these assets were never truly stabilized to begin with. They only worked under near-zero interest rates and artificially cheap capital.

Now debt service is exposing the truth.

That’s the real story here.

If a property cannot support:

1. Real operating expenses
2. Real insurance costs
3. Real reserves
4. Real debt service

…then it was never actually healthy.

It was surviving on financial engineering.

Multifamily is beginning to feel pressure too, especially in overbuilt Sun Belt markets where operators pushed aggressive rent growth assumptions into acquisitions. Some lenders are now selling apartment debt at discounts or quietly repositioning troubled assets internally rather than forcing immediate liquidation.

That part is important.

Not every distressed asset immediately hits the public market.

A lot of pain gets handled behind closed doors first:

• Quiet note sales
• Capital calls
• Preferred equity rescues
• Rescue debt
• Loan modifications
• GP dilution
• Forced cash injections

The public usually sees the smoke after the fire has already started.

But here’s where most people miss the bigger opportunity.

Market resets create positioning windows. 

When bad debt clears, liquidity eventually returns. New buyers enter. Basis resets. Strong operators with discipline, patience, and dry powder suddenly have leverage again.

That does not mean “buy everything.”

It means structure matters more than ever.

The next cycle will reward operators who:

• Controlled leverage
• Protected downside
• Built margin into deals
• Underwrote conservatively
• Anticipated refinancing risk early
• Focused on actual cash flow instead of appreciation fantasies

This is exactly why I constantly say:
“If your deal only works before financing… you don’t have a deal.”

The easy-money era distorted pricing, underwriting, and expectations. A lot of people confused rising asset values with operational skill.

Now the market is separating operators from speculators.

And honestly, this reset needed to happen.

The danger moving forward is assuming distress automatically equals opportunity. Some assets deserve to fail. Some locations are structurally broken. Some sponsors are trapped by leverage they cannot escape.

But for disciplined buyers?
This environment may create some of the best acquisition opportunities we’ve seen in years.

Not because the economy is healthy.

Because pressure creates forced decisions.

And forced decisions create opportunity for people prepared to move while others freeze.

My Take…

I believe the next 24 months are going to heavily reward operators who understand structure, liquidity, and patience.

The winners won’t necessarily be the biggest groups.

They’ll be the groups who:

• can actually close,
• can survive volatility,
• know how to negotiate debt,
• know how to structure capital correctly,
• and know the difference between a temporary problem and a permanently impaired asset.

The market is repricing risk in real time.

Most people still haven’t accepted that yet.

—
Michael Sweitzer
Texas Development & Design
Iron Ridge Capital

For deeper breakdowns on real-world deal structuring, distressed opportunities, underwriting pressure points, and market intelligence, check out The Deal Desk and Outside The Wire.