Commercial real estate lending surged in the final quarter of 2024, driven by a substantial influx of capital and robust market fundamentals. With a wave of maturing debt on the horizon, 2025 is poised for even greater momentum, according to the latest research from CBRE.
The CBRE Lending Momentum Index, which measures the pace of CBRE-originated commercial loan closings in the U.S., climbed 21% from Q3 2024 and 37% year-over-year, reflecting a strong rebound in lending activity. By the end of Q4 2024, the index reached a value of 259, significantly surpassing the five-year pre-pandemic average of 229.
Spreads on closed commercial mortgage loans averaged 184 basis points (bps) in Q4 2024, reflecting a 49 bps decline year-over-year and a marginal 1 bps increase from Q3. Multifamily loan spreads tightened by 12 bps to 156 bps, the narrowest since early 2022, largely due to compression in agency loan spreads.
Despite some recalibration in credit and equity stemming from an 80 bps shift in 10-year Treasury rates and evolving interest rate expectations, a vast pool of capital continues to drive competitive spreads across a broad range of credit markets. These include CMBS SASB, Conduit, CLOs, Agency, LifeCo, Bank, Repo, and Debt Funds, according to James Millon, U.S. President of Debt & Structured Finance at CBRE.
Looking forward, 2025 is expected to see a more active refinancing and investment sales environment, spurred by maturing debt, capital reallocation in closed-end funds, and strong market fundamentals. Optimism is particularly high for the resurgence of the office occupier market for high-quality assets in major central business districts. Lenders are anticipated to leverage loan sales to generate liquidity for strategically positioned assets and asset management-intensive properties nearing restructured maturity extensions.
Banks dominated CBRE’s non-agency loan closings in Q4 2024, representing 43% of transactions—an increase from 18% in Q3 2024 and 40% a year earlier. This growth was fueled by loan payoffs, regulatory improvements, and efforts to clean up balance sheets. Life insurance companies followed with 33% of non-agency loan closings, down from 43% in the previous quarter but up from 27% in Q4 2023. Alternative lenders, including debt funds and mortgage REITs, accounted for 23%, declining from 30% a year earlier, though debt funds saw a remarkable 72% year-over-year surge in origination volume. Meanwhile, CMBS conduits contributed 1.5% of origination volume, down from 3% a year prior.
Underwritten cap rates and debt yields continued to decline in Q4 2024, with cap rates falling by 14 bps quarter-over-quarter to 5.9%, and debt yields dropping by 46 bps to 9.4%. Loan-to-Value (LTV) ratios climbed to 64.1% from 62.8%, reflecting an environment of increased lending confidence.
Government agency lending on multifamily assets soared by 87% in Q4 2024, reaching $53 billion. For the full year, origination volume rose 19% to $120 billion. CBRE’s Agency Pricing Index, which tracks average fixed agency mortgage rates for 7–10-year permanent loans, declined to 5.4% in Q4 2024 from 5.8% in the previous quarter, the lowest level since Q2 2023.
Real Estate Credit Investments Limited (LON:RECI) is a closed-end investment company that specialises in European real estate credit markets. Their primary objective is to provide attractive and stable returns to their shareholders, mainly in the form of quarterly dividends, by exposing them to a diversified portfolio of real estate credit investments.
