▶ RSQUARE Research Center publishes 'Commercial Real Estate Mortgage Report: The End of the Rate-Cutting Era, Separating Wheat from Chaff Amid a Financing Cold Snap'
▶ Bank of Korea's rate hike on the 16th confirms the onset of a 're-acceleration phase' in lending rates
▶ Rate spread between office and logistics assets widens to 70 bps, deepening asset polarization based on cash flow stability
As the commercial real estate (CRE) market brings the rate-cutting cycle to a close and enters a period of rising financing costs, market observers expect a flight to quality driven by asset- and borrower-specific competitiveness.
RSQUARE (CEO: Lee Yong-gyun), a full-service commercial real estate firm, announced on the 21st the publication of its '2026 Commercial Real Estate Mortgage Report: The End of the Rate-Cutting Era, Separating Wheat from Chaff Amid a Financing Cold Snap.'
The report examines the upward trend in financing costs across the CRE loan market, along with growing differentiation in lending conditions by asset class, offering strategic guidance for both investors and borrowers.
Through the report, RSQUARE concludes that the rate-cutting cycle that had persisted since the second half of 2024 has effectively come to an end, with the CRE mortgage market now entering a 're-acceleration phase' in lending rates.
The shift is already being felt across the market. According to RSQUARE's analysis, senior mortgage rates for office properties in the Seoul and Bundang submarkets stood at 4.03% in Q2 2026, while the effective All-in Cost — including financial institution fees — climbed further to 4.43%. Following the Bank of Korea's benchmark rate hike on the 16th, the upward trajectory in financing costs highlighted in the report is expected to become even more pronounced.
Polarization in lending terms across asset classes is also intensifying. As of Q1 2026, senior mortgage rates for office buildings — which typically offer more stable cash flows — stood at 4.04%, while senior rates for logistics centers reached 4.74%, widening the spread between the two asset classes to 70 bps. This reflects increasingly stringent underwriting standards being applied based on asset quality.
As financing costs rise, protecting investment yields has become critical, with the spread between capitalization (cap) rates and mortgage interest rates narrowing to precarious levels. In Q1 2026, office cap rates stood at 4.36%, leaving a spread of just 32 bps over senior mortgage rates (4.04%). Any further compression in this spread risks pushing investments into negative leverage — where borrowing costs exceed asset yields — warranting close attention.
"Following the recent benchmark rate hike, upward pressure on lending rates for both new loans and refinancing is expected to persist for some time," said Gyu-jung Choi, Researcher at the RSQUARE Research Center. "Investment strategies built around prime assets with stable cash flows, conservative entry valuations, and proactive liquidity management will be essential going forward."
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▶ RSQUARE Research Center publishes 'Commercial Real Estate Mortgage Report: The End of the Rate-Cutting Era, Separating Wheat from Chaff Amid a Financing Cold Snap'
▶ Bank of Korea's rate hike on the 16th confirms the onset of a 're-acceleration phase' in lending rates
▶ Rate spread between office and logistics assets widens to 70 bps, deepening asset polarization based on cash flow stability
As the commercial real estate (CRE) market brings the rate-cutting cycle to a close and enters a period of rising financing costs, market observers expect a flight to quality driven by asset- and borrower-specific competitiveness.
RSQUARE (CEO: Lee Yong-gyun), a full-service commercial real estate firm, announced on the 21st the publication of its '2026 Commercial Real Estate Mortgage Report: The End of the Rate-Cutting Era, Separating Wheat from Chaff Amid a Financing Cold Snap.'
The report examines the upward trend in financing costs across the CRE loan market, along with growing differentiation in lending conditions by asset class, offering strategic guidance for both investors and borrowers.
Through the report, RSQUARE concludes that the rate-cutting cycle that had persisted since the second half of 2024 has effectively come to an end, with the CRE mortgage market now entering a 're-acceleration phase' in lending rates.
The shift is already being felt across the market. According to RSQUARE's analysis, senior mortgage rates for office properties in the Seoul and Bundang submarkets stood at 4.03% in Q2 2026, while the effective All-in Cost — including financial institution fees — climbed further to 4.43%. Following the Bank of Korea's benchmark rate hike on the 16th, the upward trajectory in financing costs highlighted in the report is expected to become even more pronounced.
Polarization in lending terms across asset classes is also intensifying. As of Q1 2026, senior mortgage rates for office buildings — which typically offer more stable cash flows — stood at 4.04%, while senior rates for logistics centers reached 4.74%, widening the spread between the two asset classes to 70 bps. This reflects increasingly stringent underwriting standards being applied based on asset quality.
As financing costs rise, protecting investment yields has become critical, with the spread between capitalization (cap) rates and mortgage interest rates narrowing to precarious levels. In Q1 2026, office cap rates stood at 4.36%, leaving a spread of just 32 bps over senior mortgage rates (4.04%). Any further compression in this spread risks pushing investments into negative leverage — where borrowing costs exceed asset yields — warranting close attention.
"Following the recent benchmark rate hike, upward pressure on lending rates for both new loans and refinancing is expected to persist for some time," said Gyu-jung Choi, Researcher at the RSQUARE Research Center. "Investment strategies built around prime assets with stable cash flows, conservative entry valuations, and proactive liquidity management will be essential going forward."