CRE Lending Increases in Q1 Despite Market Volatility, CBRE Finds
(Illustrations courtesy CBRE)
Commercial real estate lending surged in the first quarter, driven by higher financing volumes and “robust” activity from banks, though caution persists due to government policy and economic uncertainty impacting Treasury yields, according to CBRE, Dallas.
CBRE’s Lending Momentum Index, which tracks the pace of CBRE-originated commercial loan closings in the U.S., increased by 13% from the fourth quarter and 90% year-over-year, signaling a resilient recovery in lending activity. The index surpassed 300 for the first time since early 2023, driven by strong loan closings in January and February, with a first-quarter close at 292 after a slight March slowdown due to market volatility.
“Despite persistent and volatile Treasury rates, credit spreads continued to compress, enabling sponsors to pursue early refinancings and accretive debt for acquisitions,” said James Millon, U.S. President of Debt & Structured Finance for CBRE. “The increased investment sales activity created new financing opportunities and established valuations for less liquid asset classes.”
The report said commercial mortgage loan spreads tightened significantly in the first quarter, averaging 183 basis points, down 29 basis points year-over-year and 1 basis point from late 2024. Multifamily loan spreads narrowed by 7 basis points to 149 basis points, the lowest since early 2022, primarily due to tighter agency loan spreads.
“Banks were notably more active in Q1 2025, while liquid markets such as agency, CMBS, and CLOs benefitted from strong bond buyer demand, providing compelling financing solutions across all durations,” Millon noted. “While agency financing remained consistent, we saw a notable rise in non-agency multifamily deals, primarily from floating-rate bridge or bank financing, offering borrowers greater flexibility. Office financing also saw a significant uptick, with many large office SASBs successfully closing transactions, while data center construction loans continue to be a key area, serving a broad range of tenants beyond traditional approaches.”
Banks led CBRE’s non-agency loan closings in the first quarter, capturing a 34% share, up from 22% in late 2024, reflecting a favorable regulatory environment and strengthened balance sheets.
CMBS conduits emerged as the second-most active lending group with a 26% share, showing significant growth from 9% a year ago. By the end of Q1 2205, year-to-date private-label CMBS issuance industrywide was 132% higher than last year, CBRE said.
Life companies maintained a steady 21% share of non-agency loan closings in the first quarter, consistent with last year.
Alternative lenders, including debt funds and mortgage REITs, comprised the remaining 19% of non-agency loan closings, down from 48% a year earlier. “While remaining active, debt funds are exercising caution in the current market and facing increased competition, resulting in a 17% year-over-year decline in origination activity during Q1 2025,” the report said.
Looking at key metrics, average underwritten cap rates increased by 24 basis points quarter-over-quarter to 6.1%, while debt yields surged 90 basis points to 10.3% in the first quarter. The average loan-to-value ratio decreased to 62.2% from 63.0% in the fourth quarter, which indicates a cautious lending approach, CBRE said.
Government agency lending for multifamily assets reached $22 billion in the first quarter, reflecting a 15% year-over-year increase despite a 58% quarter-over-quarter decline. CBRE’s Agency Pricing Index, which tracks average fixed agency mortgage rates for 7–10-year permanent loans, climbed to 5.8% in the first quarter, up 40 basis points from the previous quarter and 14 basis points year-over-year.
