DALLAS, Texas—Commercial real estate lending surged in the first quarter of 2025, 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 the latest research from CBRE.
The CBRE Lending Momentum Index, which tracks the pace of CBRE-originated commercial loan closings in the U.S., increased by 13 percent from Q4 2024 and 90 percent year-over-year, signaling a resilient recovery in lending activity. The index surpassed 300 for the first time since Q1 2023, driven by strong loan closings in January and February, with a Q1 2025 close at 292 after a slight March slowdown due to market volatility.
Commercial mortgage loan spreads tightened significantly in Q1 2025, averaging 183 basis points (bps), down 29 bps year-over-year and 1 bp from Q4 2024. Multifamily loan spreads narrowed by 7 bps to 149 bps, the lowest since Q1 2022, primarily due to tighter agency loan spreads.
“Despite persistent and volatile Treasury rates, credit spreads continued to compress, enabling sponsors to pursue early refinancings and accretive debt for acquisitions. The increased investment sales activity created new financing opportunities and established valuations for less liquid asset classes,” said James Millon, U.S. president of debt and structured finance for CBRE.
“Banks were notably more active in Q1 2025, while liquid markets such as agency, CMBS, and CLOs benefited from strong bond buyer demand, providing compelling financing solutions across all durations. 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 Q1 2025, capturing a 34 percent share, up from 22 percent in Q4 2024, reflecting a favorable regulatory environment and strengthened balance sheets.
CMBS conduits emerged as the second most active lending group with a 26 percent share, showing significant growth from 9 percent a year ago. By the end of Q1 2205, year-to-date private-label CMBS issuance industrywide was 132 percent higher than last year.
Life companies maintained a steady 21 percent share of non-agency loan closings in Q1 2025, consistent with last year.
Alternative lenders, including debt funds and mortgage REITs, comprised the remaining 19 percent of non-agency loan closings, down from 48 percent a year earlier. While remaining active, debt funds are exercising caution in the current market and facing increased competition, resulting in a 17 percent year-over-year decline in origination activity during Q1 2025.
In terms of key metrics, average underwritten cap rates increased by 24 bps quarter-over-quarter to 6.1 percent, while debt yields surged 90 bps to 10.3 percent in Q1 2025. The average Loan-to-Value Ratio (LTV) decreased to 62.2 percent from 63.0 percent in Q4 2024, indicating a cautious lending approach.
Government agency lending for multifamily assets reached $22 billion in Q1 2025, reflecting a 15 percent year-over-year increase despite a 58 percent 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 percent in Q1 2025, up 40 bps from the previous quarter and 14 bps year-over-year..
