Commercial real estate lending demonstrated remarkable strength in the fourth quarter of 2024, with the CBRE Lending Momentum Index recording a dramatic 37% year-over-year increase. This surge, coupled with a 21% quarter-over-quarter rise, signals a robust recovery in the commercial lending landscape.
Banks Lead the Charge in Non-Agency Lending
- In a significant shift, banks dominated the non-agency lending space during Q4, capturing 43% of loan closings—a substantial increase from their 18% market share in Q3. This expansion reflects successful balance sheet management and an improving regulatory environment.
- Life insurance companies maintained a strong presence with 33% of loan originations, while debt funds and mortgage REITs accounted for 23% of the market, showing healthy origination volume despite a slight decline from 2023 levels.
Multifamily Sector Shows Exceptional Growth
- The multifamily sector emerged as a particular bright spot, with agency loan originations soaring 87% in Q4 to reach $53 billion.
- This impressive growth was fueled by favorable agency mortgage rates, which dropped to 5.4%—the lowest level since mid-2023.
- The full-year performance was equally notable, with volume increasing 19% to $120 billion, underscoring the sustained demand for multifamily housing.
Lending Terms Become More Favorable
- The lending environment showed marked improvement across several metrics. Spreads on closed commercial mortgage loans tightened by 49 basis points year-over-year, while multifamily loan spreads reached their most competitive levels since early 2022.
- Average underwritten cap rates settled at 5.9%, and debt yields decreased to 9.4%. Notably, the average Loan-to-Value ratio climbed to 64.1% from 62.8% in Q3, indicating growing confidence among borrowers.
Looking Ahead
The momentum in commercial real estate lending appears poised to continue through 2025, driven by significant debt maturities that will necessitate refinancing activity. Many industry experts anticipate sustained lender engagement, with a particular focus on strategic loan sales to manage liquidity and optimize portfolios.
The CBRE Lending Momentum Index’s current reading of 259 significantly exceeds the pre-pandemic five-year average of 229, suggesting a robust foundation for continued growth.
As the market evolves, lenders are expected to maintain their strategic approach to both refinancing opportunities and new originations, while carefully managing risk exposure through selective loan sales and targeted asset management strategies.
About Myles Lichtenberg, MylesTitle Founder, Owner & Chief Title Insurance Officer
Myles Lichtenberg, Esq., is a recognized leader in the real estate title insurance industry. Since 1979, Mr. Lichtenberg, and his amazing team, have conducted well over 27,000+ real estate title transactions and over $16 Billion Dollars of settled transactions, involving just about every type and variety of real estate configuration – from commercial to residential, from complex to simple and from single-state to multi-state portfolios.
