Amid ongoing market volatility, tightening credit conditions, and elevated interest rates, lenders are navigating a more complex and disciplined commercial real estate environment. At Connect Phoenix Multifamily 2026, Wm. Ryan Donahue, Vice President, Business Insurance Division at Marsh McLennan Agency, spoke with Sarah Quinn, Co-founder and Vice President of Connect Commercial Real Estate, about the complexities of insurance and risk in Phoenix’s growing market, and what companies can do to reduce insurance costs amid a cautious economic climate.
Q: Can you give an overview of what you’re seeing in today’s market?
A: What we’re seeing now is a much more disciplined environment. Capital is out there, but it’s highly selective. There’s also a disconnect between buyers and sellers as they try to recalibrate expectations after the rapid rate shifts over the past few years. So while liquidity exists, it’s not always aligned with what borrowers or developers want to execute.
Q: How have underwriting standards changed compared to a few years ago?
A: They’ve tightened significantly, with a major focus on concessions. In prior cycles, you could assume concessions would burn off relatively quickly. Today, we’re seeing them extend much longer, sometimes eight to ten months, which makes underwriting far more complex. That uncertainty impacts how we calculate effective rents and net operating income, and ultimately whether a deal pencils.
Q: What impact is that having on deal flow?
A: It’s creating friction. Developers tend to be optimistic about future performance, while lenders and credit teams are more conservative. That gap in expectations can stall deals. It’s not that transactions aren’t happening—it’s that they require more alignment and negotiation to get across the finish line.
Q: From a lending perspective, what does the market look like today?
A: On the banking side, we’re still focused heavily on construction lending, typically short-term, two- to four-year loans, almost always floating rate. We’ll also look at bridge opportunities, but the common thread is transitional assets, projects that need time to stabilize before refinancing or sale.
Q: What are the biggest headwinds you’re seeing right now?
A: It’s really a combination of three pressures: prolonged concessions, rising operating expenses, and elevated interest rates. Even when assets are leased and operating, those factors compress returns and make refinancing more difficult, especially for deals underwritten in a very different environment a few years ago.
Q: How are interest rates shaping your outlook?
A: Rates are the biggest variable. If they move higher, that creates additional stress across the system. What the market really needs is stability. If the 10-year Treasury settles around the 4% range, that’s a level where deals can start to make sense again, and transaction activity can pick up.
Q: Despite the challenges, what gives you confidence going forward?
A: Ultimately, fundamentals are still relatively healthy. Occupancy is strong, and demand hasn’t disappeared. The issue isn’t operations; it’s the capital stack. If concessions begin to ease and supply moderates, we should see the market stabilize. I don’t think we’re headed for a dramatic reset like prior cycles, but it will take time to work through the current dislocation.
The post Recap from Connect Phoenix Mutifamily 2026 – The Phoenix Factor and the State of Insurance and Risk in a Growth Market appeared first on Connect CRE.
