How to Decide Whether to Hold, Sell, or Refinance Commercial Property in 2026
In 2026, many Orange County commercial property owners are being forced to revisit a decision they have been able to defer for years: should you hold, sell, or refinance your asset?
Borrowing costs remain well above the pre-pandemic era, a significant wave of loan maturities has been pushed into 2026, and property fundamentals now vary sharply not just by asset class, but by submarket.
In this environment, relying on “what worked in 2019” or “what another owner did” is increasingly risky. The owners making the strongest decisions today are grounding them in property-level cash flow, upcoming debt events, and realistic assumptions about rent growth, vacancy, and tenant demand in their specific part of Orange County and coastal Southern California.
This guide outlines the practical framework The Resha Group uses with clients to evaluate hold, sell, and refinance scenarios. The goal is not prediction or speculation, but clarity, helping owners move forward with data-driven confidence instead of guesswork.
Why This Decision Is Harder in Today’s Market
Across the United States, commercial real estate is entering 2026 after a period defined by volatility, elevated borrowing costs, and a broad decision by many owners to hold rather than transact at distressed pricing. Vacancy rates that were once historically tight have widened: office space now sits near 18% nationally, industrial vacancy is around 7%, and retail remains comparatively lower, near 4%, while multifamily hovers around 4%. Industry outlooks point to cautious optimism, but they consistently emphasize that stability in 2026 will vary sharply by property type, submarket, and local demand drivers rather than move as a single national trend. (source: commercialcafe.com)
In Orange County, the industrial vacancy rate has risen, reflecting a cooling demand trend and slower net absorption compared with recent years. Retail availability shows modest increases but still comparatively tight levels, even as rent growth has slowed. Office shows mixed signals with moderate recovery in leasing activity, but vacancy is still elevated.
Overlay this with broader financing stress: commercial loan maturities across the U.S. jump sharply in 2026, creating a refinancing wall that will test owners’ ability to secure competitive terms.
In this environment, the trade-offs between holding, selling, and refinancing are not linear. What made sense for stabilized income in 2022 may not make sense today when debt costs, renting patterns, or tenant mix have shifted. A disciplined decision process is essential.
Key Financial Signals to Evaluate Before Choosing
At the property level, owners should assess a few core financial signals before considering a strategic shift.
Cash flow stability is the starting point. Owners should evaluate whether current NOI and realistic rent assumptions can cover operating expenses and debt service over the next two to five years, not under best-case scenarios but under today’s rate environment. If projected debt service coverage falls below roughly 1.20 to 1.25, refinancing often becomes challenging without new equity, a rate buydown, or structural changes to the capital stack.
Lease rollover deserves the same level of scrutiny. When a meaningful portion of leases expires within the next 12 to 24 months, it should be treated as a risk event comparable to a loan maturity. Vacancy downtime, tenant improvement costs, and leasing commissions must be modeled explicitly. If revenue visibility is flat or deteriorating and rollover risk is concentrated, holding the asset becomes less compelling unless there is a clear, executable repositioning strategy in place..
Loan maturity timing is another signal. With a high volume of commercial mortgages maturing in 2026, refinancing costs and availability will vary widely by lender and property type. If your loan comes due in 2026 with high interest rates and limited lender appetite, refinancing may be costly and risky unless the property’s cash flow supports the new terms.
Cap rate trajectory relative to your cost basis matters as well. If local market cap rates have widened (meaning lower valuations relative to income), selling may crystallize value now before further compression or uncertainty impacts pricing.
Lastly, deferred maintenance and near-term capital needs must be factored into any hold decision. For many owners, a significant capital project without a clear path to rent growth or value creation becomes the trigger to reassess the strategy altogether. In these cases, selling the asset or pursuing a partial recapitalization can often reallocate capital more efficiently than continuing to fund an asset with limited upside.
How Interest Rates Impact Each Option
Interest rates remain central to any hold, sell, or refinance decision. While markets are pricing in potential Federal Reserve easing in 2026, most commercial loans are still being quoted at all-in rates that feel elevated compared to the ultra-low environment of the late 2010s. Lenders have largely offset anticipated rate cuts by widening credit spreads and tightening underwriting standards, keeping effective borrowing costs higher than many owners expect.
For refinancing, lower policy rates do not automatically translate into materially lower debt service. There is often a lag between Federal Reserve cuts and movement in commercial lending rates, and lenders tend to maintain wider credit spreads until property fundamentals clearly improve. When we model refinancing scenarios for clients, we typically include at least one case that assumes only a 25 to 50 basis-point improvement in all-in rates, rather than relying on a rapid return to pandemic-era borrowing costs.
For holding: higher interest rates can suppress valuations and slow transaction activity — creating a strong argument for holding well-performing assets rather than selling into thin markets. But holding also means carrying risk if tenant demand deteriorates further.
For selling: if interest rate expectations tighten cap rates and buyers demand higher yields, the resulting price discount could make selling now more attractive than pushing listings further into uncertain conditions.
Rent Growth and Expense Trends to Watch in 2026
National data suggest rent growth across commercial sectors will be modest yet positive in 2026, with multifamily and industrial remaining stronger than office or retail in many regions. Multifamily rent growth slowed, but fundamentals remain resilient.
Locally in Orange County, retail rent growth has been flat to modest, and vacancy remains low enough that well-positioned retail can still perform, particularly in experiential and essential-retail niches. Lease structure matters materially here: NNN retail assets continue to benefit from expense pass-throughs, while gross and modified-gross leases leave owners more exposed to rising operating costs when rent growth is limited. Industrial lease rates and absorption trends point to caution, with vacancy climbing and landlords increasingly relying on concessions to secure tenants. Office fundamentals remain mixed, but pockets of recovery are emerging for newer or amenity-rich space, where lease structure again plays a critical role in determining how inflation and operating expenses impact cash flow, even as conversion and repositioning strategies gain traction.
Expense trends are equally important. Operating costs, including insurance, property management, and capital reserve requirements, have risen faster than inflation in some sectors and will continue to pressure NOI unless rents keep pace.
Portfolio-Level Considerations Versus Single Asset Thinking
For owners with multiple assets, upcoming loan maturities, or long-term capital objectives, the hold versus sell versus refinance decision is rarely about perfectly timing the market. It is about optimizing outcomes across the entire portfolio. This is where portfolio-level advisory becomes critical, shifting the focus from isolated asset metrics to how each property contributes to overall cash flow, liquidity, and risk exposure.
Some assets may serve as core income anchors even if their individual performance appears muted in the current cycle. Others may quietly drag portfolio results or consume disproportionate capital. A retail strip center with stable tenants and long-dated leases, for example, can remain a reliable cash generator even as industrial assets in the same portfolio face softening demand. Conversely, older office properties with elevated vacancy and deferred capital needs may better support long-term goals when sold or repositioned rather than held.
Portfolio stress testing helps quantify these trade-offs. Owners can model scenarios where selling a single asset improves liquidity and strengthens the balance sheet to support refinancing of stronger properties. In other cases, reallocating capital toward repositioning or converting underperforming assets into higher-demand uses, such as mixed-use or residential where regulatory support exists in Orange County, can materially improve long-term portfolio performance.
Real World Orange County Scenarios by Asset Type
Retail: Tight availability and stabilized occupancy have kept retail relatively resilient, particularly in neighborhood and coastal corridors where space remains limited, and tenant sales are healthy. In these environments, many owners are best served by holding or refinancing and focusing on modest rent growth, tenant quality, and lease durability rather than selling solely in response to negative national headlines.
Industrial: Orange County industrial vacancy has moved up into the mid-single digits as new supply delivers and logistics demand normalizes. In several submarkets, landlords are increasingly relying on concessions to secure tenants. This shift makes it critical for owners to underwrite realistic lease-up downtime and free rent when evaluating whether to refinance, hold, or sell, particularly if capital needs or near-term loan maturities are approaching.
Office: Orange County office continues to show selective signs of recovery, with improved leasing activity and occupier demand concentrated in newer, amenity-rich space. Structural shifts, including remote work and conversion pressure, still complicate long-term hold decisions. Class A properties with strong tenant rosters may warrant holding or refinancing, while owners of older mid-rise or campus-style buildings near residential neighborhoods may be better served exploring adaptive reuse, medical conversion, or a sale to a buyer with a clear repositioning business plan rather than competing directly with new Class A product.
Mixed-Use/Mixed-Use Conversions: Adaptive use of obsolete office into mixed-use or residential has become a local strategy to convert underperforming assets into higher-demand product types.
How to Stress Test Each Option Before Acting
A disciplined stress-testing framework helps surface the risks that matter most before decisions are made. For each path, owners should explicitly model the following:
• Hold: Test cash flow durability under base and downside scenarios, including realistic rent growth, expense inflation, lease rollover downtime, and capital requirements to ensure the asset can support itself over the next two to five years.
• Refinance: Simulate multiple interest-rate and loan-to-value outcomes, recognizing that many owners approaching 2026 maturities may need to contribute new equity, execute partial paydowns, or adjust capital structures rather than rely on a simple rate reset.
• Sell: Run cap rate sensitivity analyses to understand how pricing may shift under reasonable valuation changes in 2026, while accounting for transaction costs, tax implications, and redeployment risk.
• Portfolio Impact: Evaluate how each option affects liquidity, leverage, and balance sheet flexibility, including the ability to support stronger assets, fund capital projects, or pursue future acquisitions.
Documenting the assumptions behind each scenario helps ensure decisions are defensible, comparable, and aligned with long-term portfolio objectives.
Conclusion
Deciding whether to hold, sell, or refinance commercial property in 2026 requires rigorous data, realistic forward-looking assumptions, and a clear understanding that performance varies materially by asset type and local market dynamics. In Orange County, where retail, industrial, office, and mixed-use assets are each on distinct performance curves, selling is often less about exiting a property and more about repositioning capital into assets with stronger cash flow durability, longer lease terms, or more favorable debt structures. Owners who stress test their options and evaluate outcomes at the portfolio level are far more likely to preserve capital and strengthen long-term performance.
By grounding decisions in market data, disciplined financial modeling, and clear strategic alignment, investors can replace reactive moves with confident, forward-looking plans.
If you own office, industrial, or retail property in Orange County or coastal Southern California and are weighing a hold, sell, or refinance decision, The Resha Group can build a customized scenario model for your asset or portfolio. Our team combines current market data, lender feedback, and buyer-demand intelligence to help owners quantify trade-offs, structure sale or refinance strategies, and move forward with clarity. To request a confidential evaluation or broker opinion of value, contact The Resha Group or submit your property information through our website.
