5 Year vs 7 Year vs 10 Year CMBS | Which Term Is Right for Your Deal?

The May 2026 Pricing Snapshot

Multifamily / MHC CMBS (May 2026 indicative):

| Term | Treasury Base | Spread | All In Rate | |---|---|---|---| | 5 Yr Fixed | 3.92% | 215 to 240 bps | 6.07 to 6.32% | | 7 Yr Fixed | 4.10% (interp swap) | 200 to 225 bps | 6.10 to 6.35% | | 10 Yr Fixed | 4.31% | 190 to 215 bps | 6.21 to 6.46% |

The counter intuitive observation: 10 yr CMBS prices essentially the SAME as 5 yr CMBS, both at the 6.07 to 6.46% level. Only 14 bps difference between the cheapest 5 yr and cheapest 10 yr.

In a normal Treasury curve, the 5 yr Treasury would yield 50 to 100 bps below the 10 yr. CMBS spreads compress further on shorter tenors. Result: 5 yr CMBS would normally price 50 to 100 bps tighter than 10 yr.

May 2026 is not normal. The Treasury curve is unusually flat (4.31% / 4.10% / 3.92% across 10/7/5 yr, only 39 bps spread across 5 years of duration). CMBS spreads are wider on shorter tenors (215 to 240 bps for 5 yr vs 190 to 215 for 10 yr) because the shorter duration credit risk is less attractive to bondholders in the current market.

Net result: 10 yr CMBS is currently the contrarian value pick. Sponsors who default to shorter tenors out of habit are paying the same rate (or more) for materially less duration.

When 5 Year CMBS Wins

Clear 4 to 5 year hold thesis with planned sale or recap. Sponsor has a defined exit timeline and wants prepay flexibility at year 4.5 to 5 (the open prepay window). Common in: value add multifamily syndications with stabilization then sale strategy, opportunistic sponsors planning portfolio recap cycles, family offices with rolling 5 year tax planning windows.

Belief that interest rates will fall. Sponsor expects to refinance at lower rates mid decade. The 5 yr open prepay window arrives sooner. Trade off: paying the same or higher rate today for the option value of earlier prepay flexibility.

Renovation timeline + stabilization arc fits 5 years. PIP execution + stabilization + 12 months trailing operating data → mid term refinance window naturally falls at year 4 to 5.

Shorter prepayment lockout preference. 5 yr lockout 24 months. 10 yr lockout 24 to 48 months. Sponsors who want maximum optionality earlier in the loan life choose 5 yr.

Trade off in May 2026: Currently paying same or higher rate for the shorter tenor, which is the wrong direction. Wait for curve to normalize OR accept the cost for the optionality.

When 7 Year CMBS Wins

5 to 7 year hold thesis. Longer than typical 5 yr value add cycle, shorter than 10 yr long hold. Mid market sponsors with portfolio strategies that don't fit the 5/10 yr defaults.

Portfolio recap cycles. Many private REITs and family office platforms run 7 year fund cycles. CMBS term aligned with fund cycle simplifies refinance timing for the LP committee + GP track record reporting.

Defeasance friction concerns at year 8 to 9 of a 10 yr. 10 yr CMBS defeasance friction is heaviest in years 8 to 9, sponsor planning sale at that timeline pays significant defeasance cost. 7 yr CMBS gets to open prepay window 12 to 18 months earlier than 10 yr.

Some property types prefer 7 yr. Hotel + Class B office sometimes choose 7 yr because the operating business risk + valuation uncertainty makes a 10 yr commitment less attractive. Sponsor doesn't want to be locked into 10 years if hotel cycle turns or office tenant departs.

Pricing in May 2026: 7 yr typically slightly tighter than 5 yr but slightly wider than 10 yr, depending on curve shape. Currently 6.10 to 6.35% on multifamily, middle of the pack.

When 10 Year CMBS Wins

Long hold institutional thesis. Sponsor planning 7 to 10+ year hold. Insurance affiliated platforms, REITs with portfolio build strategies, family offices with multi generational hold timelines.

Lock the rate for as long as possible in low rate environments. When sponsor believes rates may rise, locking 10 yr fixed makes sense. Counter cyclical insurance against future rate increases.

Deepest secondary market for refinance flexibility. 10 yr is the most liquid CMBS tenor with the deepest bondholder demand. Refinance availability and pricing transparency is highest at 10 yr.

$5M+ deal size. 10 yr execution prices tightest in the curve at most deal sizes, lower spreads + deeper market.

Currently the contrarian value pick (May 2026). With curve inversion, 10 yr is pricing similar to or below 5 yr/7-yr. Sponsors getting longest duration at lowest absolute cost. Counter intuitive but supported by current spread differentials.

Trade off: Defeasance friction at years 8 to 9 if sponsor plans early exit. Plan for either 10 yr full hold OR 5 to 7yr exit (and choose 5/7 yr CMBS instead). Mid cycle exits at year 6 to 8 of a 10 yr CMBS are the most expensive timing.

How Prepayment Differs Across Terms

All three CMBS terms use defeasance OR yield maintenance for prepayment. Differences in lockout + open prepay windows:

| Term | Lockout | Defeasance/YM Window | Open Prepay | |---|---|---|---| | 5 Yr CMBS | 24 mo (years 1 to 2) | Years 2 to 4 | Last 6 months (years 4.5 to 5) | | 7 Yr CMBS | 24 to 36 mo | Years 2 to 6 or 3 to 6 | Last 6 months (years 6.5 to 7) | | 10 Yr CMBS | 24 to 48 mo | Years 2 to 9 or 4 to 9 | Last 6 to 12 months (years 9 to 10) |

Defeasance cost is highest mid cycle. On a 10 yr loan, defeasance at year 6 is materially more expensive than at year 9. The PV of remaining cash flows discounted at current Treasury yield drives the cost, and it's heaviest in middle years.

Yield maintenance is alternative to defeasance. Pay PV of remaining interest at current Treasury + 25 to 50 bps spread. Operationally simpler than defeasance (no Treasury portfolio purchase + custodian + accountant cert) but slightly more expensive than defeasance.

Open prepay windows arrive faster on shorter terms. 5 yr CMBS gets to open prepay at year 4.5; 10 yr at year 9 to 9.5. Sponsors who want prepay optionality earlier choose shorter terms, but pay current curve inverted pricing premium.

Property Type Pricing Variation Across Terms

All three tenors are eligible for all major property types, but pricing varies materially by property type, NOT just by tenor.

May 2026 10 yr CMBS spreads: Multifamily 190 to 215 bps · Industrial/Retail/Office 200 to 225 bps · Self Storage 200 to 225 bps · Hotel 320 to 345 bps (~125 bps wider than other property types).

Hotel materially wider across ALL terms. Hotel 5 yr 7.37 to 7.62%, 7 yr 7.40 to 7.65%, 10 yr 7.51 to 7.76%. The operating business risk + brand flag concentration risk + RevPAR cyclicality drives wider spreads regardless of tenor.

Office Class B + commodity office often declined entirely. Office CMBS in May 2026 increasingly limited to Class A + life sciences + medical office. Class B + commodity office routes to bank portfolio or specialty CRE debt.

Self storage prices similar to commercial. Strong CMBS market acceptance reflects predictable cash flows + low operating risk.

What PeerSense Recommends

Default recommendation in current May 2026 environment: 10 yr CMBS for institutional sponsors $5M+ with hold thesis 7+ years.

Rationale: - 10 yr is currently the cheapest or near cheapest tenor (curve inversion) - Deepest secondary market - Longest rate lock for sponsors who think rates may rise - Best fit for institutional capital with long duration liabilities

Choose 5 yr or 7 yr instead when: - Specific exit timeline 4 to 7 years (don't pay defeasance friction at year 8 to 9 of a 10 yr) - Strong belief rates will fall (capture refi window earlier) - Property type with operating business risk that may not survive 10 years (Class B office, commodity hotel) - Sponsor's fund cycle aligns with 5 yr or 7 yr timeline

PeerSense pre runs the 3 constraint underwriting (DSCR / LTV / Debt Yield) at all three tenors before formal CMBS submission. The right tenor depends on the deal specific math + sponsor profile + hold thesis. We deliver indicative pricing across all three after the file is on the desk.