Underwriting Development Projects in a More Selective Financing Market 

For owners and developers, 2026 is likely to place a greater premium on disciplined underwriting, clear assumptions, and strong project fundamentals. Financing may still be available for well-positioned developments, but lenders and equity partners are expected to be more selective about where they commit capital. 

That does not mean good projects cannot move forward. It does mean the margin for vague assumptions is smaller. Developers may need to spend more time proving demand, validating costs, and showing how a project can perform if timing, rates, or market conditions shift. 

Build the Case Behind the Numbers 

A pro forma should do more than show that a project works under favorable conditions. It should explain why the assumptions are reasonable. Rent growth, lease-up timing, construction costs, tenant demand, exit pricing, and operating expenses all deserve careful review. 

This is especially important in a market where performance can vary widely by property type and location. A strong industrial project in one market may face a very different financing conversation than a speculative office or mixed-use project in another. Multifamily, retail, industrial, and office assets each carry their own risks, and lenders will likely expect developers to understand those differences at a detailed level. 

The strongest underwriting will connect the financial model to real project conditions. That may include current submarket activity, tenant conversations, construction pricing, local absorption trends, and the sponsor’s experience with similar developments. 

Stress-Test the Capital Plan 

In a more selective market, the capital stack deserves as much attention as the project budget. Developers may need to evaluate how the deal performs under different rate, leverage, and timing scenarios. Lower leverage, added equity, larger contingencies, phased construction, or revised hold periods may all be part of the discussion. 

The goal is not simply to make the numbers pencil. The goal is to understand where the project remains sound if conditions change. What happens if lease-up takes longer than expected? What if construction costs increase? What if refinancing terms are less favorable than planned? These questions are easier to answer before financing discussions begin. 

Prepared Sponsors May Stand Apart 

Selective financing markets often reward preparation. Developers who can clearly explain their assumptions, document demand, manage costs, and show flexibility may be better positioned to earn lender confidence. 

As owners and developers evaluate 2026 opportunities, now is the time to revisit project underwriting with a more critical eye. A careful review of assumptions, financing structure, and risk exposure can help determine whether a project is ready to move forward or needs refinement before capital is pursued. Brady Martz professionals can help owners and developers think through the financial and advisory considerations that support more confident project planning.