Commercial real estate lending in the first quarter reached a five-year high, with a growing pool of capital boosting transaction volume.
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The CBRE Lending Momentum Index, which tracks the pace of CBRE-originated loan closings over a rolling 36-month period, reached its highest level since 2021, which the brokerage said signals stronger lending momentum and improved sentiment in the marketplace.
Alternative lenders like debt funds and mortgage REITS accounted for 53% of nonagency loan closings in the first quarter, a massive leap from their 19% share of transaction volume a year earlier. Debt funds were the primary driver, with a 280% increase in deal activity.
Banks had the second-largest share of nonagency loan closings at 22%, down 12 percentage points from a year earlier. CMBS lenders also ceded significant ground, accounting for 8% of loan volume compared to 26% during the first quarter of the 2025. Life insurance companies gave up four percentage points of volume and made up 17% of transactions in the first quarter.
“We continue to see a more disciplined, yet increasingly healthy commercial real estate lending environment. Rising acquisition activity is driving meaningful price and value discovery, while fresh equity is helping rebalance lender and securitized portfolios,” CBRE Co-Head of Capital Markets James Millon said in a statement.
Average loan size rose 14% year-over-year, and commercial mortgage loan spreads declined by two basis points to 181 bps, while multifamily spreads declined by 13 bps to 136 basis points based on fixed-rate, seven- to 10-year loans with median loan-to-value ratios around 60%.
Underwriting metrics were little changed. Loan constants, the debt service on a loan compared to its origination value, slipped 10 basis points since the start of the year to 6.7%. Average mortgage rates, at 5.7%, are down 110 basis points, and debt yields slid 30 basis points in the first quarter to 9.5%.
Average LTV ratios for commercial loans rose 250 basis points year-over-year to 61.5%, while multifamily LTV ratios are up 220 basis points to 67.2%, which CBRE analysts say indicates a modestly less conservative approach from lenders.
On the agency side, originations from Fannie Mae and Freddie Mac increased 35% year-over-year to just under $30B. CBRE’s Agency Pricing Index, which tracks average fixed agency mortgage rates, fell 42 basis points year-over-year to 5.4%.
After largely sitting on trillions of dollars raised for post-pandemic investment strategies, money managers are deploying capital into debt markets to refinance the billions of dollars' worth of loans that are coming due or had been punted during the prolonged extend-and-pretend part of the market cycle.
Banks are also back to writing loans on commercial real estate assets at the same pace as before the pandemic.
The Mortgage Bankers Association projects overall commercial and multifamily debt maturities will drop by 9% in 2026 to $875B and predicts further declines through 2031 as more loans are paid off compared to new loans being underwritten.
Investors poured $172B into private commercial real estate fundraising in 2025, a 13% increase from the prior year and the first time since 2021 that investment increased.
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