Commercial Real Estate lending saw significant growth in Q4 2024, driven by a strong influx of capital and robust market fundamentals. According to the latest research from CBRE, the trend is expected to continue into 2025.
In the final quarter of 2024, commercial real estate lending saw a considerable boom, supported by strong fundamentals across various sectors and a significant influx of capital. According to CBRE’s most recent research, this trend is expected to carry over into 2025, predominantly driven by maturing debt.
The CBRE Lending Momentum Index, which gauges the rate of CBRE-originated commercial loan closures in the US, rose by 21% from Q3 2024 and 37% year-over-year. This surge indicates a strong recovery in lending activity. The index ended Q4 2024 with a value of 259, substantially outperforming the pre-pandemic five-year average of 229.
The average spread on closed commercial mortgage loans in Q4 2024 was 184 basis points (bps), a decline of 49 bps year-over-year and a slight increase of 1 bps from Q3 2024. Spreads on multifamily loans compressed by 12 bps during the quarter to 156 bps. The tightening of spreads, primarily due to agency loan spread compression, marked the lowest levels since Q1 2022.
James Millon, U.S. President of Debt & Structured Finance for CBRE, noted an uptick in market activity in the fourth quarter. Despite some deal deferrals caused by shifts in 10-year Treasury rates and revised rate expectations, a substantial amount of capital continues to support competitive spreads across various credit markets.
Predictions for 2025 suggest a more dynamic refinancing and investment sales market, driven by maturing debt, capital reallocation in closed-end funds, and robust fundamentals across most real estate sectors. Optimism is particularly high regarding the resurgence of the office occupier market for top-tier assets in major CBDs. Lenders are expected to leverage loan sales to create liquidity for strategically positioned assets and asset management-intensive properties.
In Q4 2024, banks accounted for 43% of CBRE’s non-agency loan closures, a significant increase from their 18% share in Q3 2024 and 40% share a year earlier. Meanwhile, life companies were the second most active lending group, accounting for 33% of non-agency loan closures. Alternative lenders, such as debt funds and mortgage REITs, followed with a 23% share, down from 30% a year earlier.
Government agency lending on multifamily assets substantially increased by 87% to $53 billion in Q4 2024. For the full year, origination volume grew by 19% to reach $120 billion. At the same time, CBRE’s Agency Pricing Index, which tracks average fixed agency mortgage rates for 7–10-year permanent loans, decreased to 5.4% in Q4 2024 from 5.8% in the previous quarter, marking the lowest level since Q2 2023.
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