As Q4 approaches, 2026 looks very different from what many commercial real estate investors envisioned back in January. The war in Iran, the prospect of another rate hike, a 10-year Treasury approaching 5% and oil above $100 a barrel have complicated the calculus behind virtually every deal. Against that backdrop, commercial real estate is behaving less like one market than a collection of markets, with opportunity varying sharply by geography, property type and position in the capital stack.
On the latest episode of The CRE Weekly Digest by LightBox, Jeff Brown, CEO of T2, a real estate investment firm and bridge lender, explained where his firm is finding conviction in a market that increasingly rewards precision over broad-based bets. Four takeaways stood out.
1. Distress Is Real, But Don’t Call It a Wave
Forget the fire-sale free-for-all many investors once expected. Despite years of predictions that higher rates would unleash a wave of distressed opportunities, Brown says what has emerged so far is far more targeted and episodic, with much of it tied to loans originated during the 2021-2022 boom that are now reaching maturity.
“From my vantage point, there hasn’t been a wave of distress. We’re on offense, but it’s very targeted to a specific market or property type. Multifamily is in the crosshairs right now, largely because so many syndicators emerged in the market in 2021-2022, and now their loans are coming due or their investors are upset. They can’t feed the meter anymore so that’s where the crosshairs are and it’s very episodic.”
2. Slowing Multifamily Supply Could Reset the Rent Story, and Chicago Offers a Preview
In a market where investors can no longer count on falling interest rates to rescue a deal, understanding property fundamentals is critical. Brown sees an emerging opportunity in multifamily markets where the development pipeline is thinning, allowing concessions to burn off and giving well-positioned properties greater pricing power. Chicago is one market that illustrates the dynamic.
“I feel confident that we’re going to start seeing some multifamily rent growth in certain metros as new supply abates due to macroeconomic factors that make it difficult for developers to rationalize development. This means that those with a great asset should get rewarded with concessions burning off in 2027, and maybe even rent increases. Chicago is a good example. Because of the lack of new construction over the past five years, the Chicago market is benefiting from outsized demand and now ranks as a top five market for multifamily rent growth.”
The broader data supports the direction of Brown’s argument. Chicago has been among the stronger major multifamily markets for rent growth, particularly in the urban core, as relatively modest inventory expansion has helped maintain pricing power.
3. In a High-Rate World, Real Estate Has to Earn Its Keep
For Brown, higher-for-longer rates aren’t a reason to retreat from real estate, but they are a reason to be much more selective. That means favoring assets capable of producing sustainable NOI growth, with manageable operating expenses, realistic assumptions about rents and capital structures that don’t depend on dramatically lower borrowing costs to work.
“Commercial real estate fundamentally needs to be an inflation hedge. It needs to be a diversifier. It needs to be what I call a ‘cash machine.’ So that’s what we work hard to do, to build these resilient assets that have predictable distributions. T2 manages our balance sheets intensely well, so that high interest rates don’t impede cash flow.”
It’s a useful distinction in today’s market: an asset can’t simply appreciate its way out of an aggressive basis or expensive financing. It increasingly has to attract tenants, support rent growth, and deliver positive cash flow.
4. His Strongest Bet: Senior Secured Lending
Ask Brown where he would put new capital today and his answer comes without much hesitation. His strongest bet isn’t on equity investment or a sweeping distress strategy. It’s senior secured lending.
“A major part of T2’s business for more than 12 years is being a bridge lender. In light of the uncertainty out there, my highest conviction investment by a mile is in the senior secured lending space. As challenging and choppy as the transaction market might be right now, the lending environment is red hot. There are an abundance of lenders out there from banks to life insurance companies to CMBS to bridge lenders like T2. So there’s no shortage of capital to help in the lending space. T2 is able to financially engineer a loan to find a bank that might buy an A piece of our loan where we hold onto the B piece, and we get amplified returns as a result of that.”
That may be the clearest expression of Brown’s broader strategy. T2 isn’t waiting for a downturn to create opportunity, nor is it underwriting deals on the assumption that lower rates will eventually bail out the market. Instead, the firm is looking for places where property fundamentals, basis and capital structure provide enough margin for error to compensate for today’s macro uncertainty. That means paying close attention to local supply and demand, realistic rent-growth potential and sustainable cash flow, while finding additional opportunity in parts of the capital stack where structure itself can create an edge.
In today’s fractured CRE market, confident decision-making isn’t necessarily about choosing the right property type. It’s about choosing the right asset, in the right market, with the right capital structure.
Thanks to Jeff Brown for joining us. Listen to the full conversation.
In a market defined by uncertainty, the opportunities are there. The challenge is knowing where to look. Explore LightBox Live for Investors.
About The CRE Weekly Digest by LightBox
Stay informed with weekly episodes of The CRE Weekly Digest by LightBox, featuring insights into the latest commercial real estate developments and conversations with industry leaders. Join hosts Manus Clancy and Dianne Crocker as they put CRE data, trends, and news into context.
Listen on all major podcast platforms or explore the full episode library at www.LightBoxRE.com/podcasts.
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