Commercial Brokers & Property Managers NAICS 531210

Jun 16, 2025 - Commercial Real Estate Lending Improves in Q1 2025

• Lending activity in the commercial real estate market saw robust growth in the first quarter of 2025 despite economic uncertainty stemming from government policy and its impact on Treasury yields, according to CBRE. The CBRE Lending Momentum Index rose by 13% in the first quarter of 2025 compared to Q4 2024 and increased 90% over Q1 2024. The Lending Momentum Index tracks CBRE-originated loan closings in the US. Banks led non-agency loan closings in the first quarter with a share of 34%, followed by commercial mortgage backed securities (CMBS) conduits (26%), life insurance companies (21%), and alternative lenders, such as debt funds and mortgage REITs (19%).
• Fitch Ratings’ US CMBS delinquency rate rose by seven basis points to 3.08% in May 2025 from 3.01% in April. The May rise was driven by increased new office delinquencies and reduced resolution activity. Commercial mortgage-backed securities (CMBS) are fixed-income investment products backed by mortgages on commercial properties rather than residential real estate. The delinquency rate is the percentage of commercial real estate loans that were 30 or more days past due or in foreclosure. A rising delinquency rate indicates that an increasing number of commercial property owners cannot pay the mortgages on those properties. Current and prior-month delinquency rates for May and April were: Office: 7.70% (from 7.42% in April); Retail: 3.81% (from 3.79%); Hotel: 3.18% (from 3.45%); Multifamily: 0.90% (from 0.79%); Industrial: 0.71% (from 0.60%); Mixed Use: 4.35% (from 4.60%); Self-storage: 0.08% (from 0.05%); and Other: 1.34% (from 1.32%).

• The Trump administration’s trade war threatens the recovery of the US office property market, according to The Wall Street Journal. While office leasing activity in the first quarter of 2025 was the strongest since 2019, some businesses are putting plans for new space on hold amid economic uncertainty and recession fears brought on by shifting trade policies. If a slowing economy leads to weaker hiring or layoffs, companies will likely trim their office occupancy to reduce costs. Tariffs could also trigger inflation and higher interest rates, chilling new office development activity. The gradual recovery of the office market is important for cities that have struggled since the pandemic. Offices are the core of cities’ business districts, which generate taxes, jobs, and growth and contribute to local economies by supporting small businesses, including nearby restaurants, bars, and retail.
• As distress in the commercial real estate market persists, more lenders may require property owners to take on force-placed insurance, according to Bisnow. Lenders can require force-placed insurance if a borrower’s coverage lapses, is insufficient to cover potential losses, or fails to provide proof of insurance. Force-placed typically covers the loan balance and offers protection against fire, wind, and underinsured equipment, and its cost is baked into the loan’s monthly payments. The use of force-placed insurance tends to tick upward during widespread downturns. According to commercial real estate data firm Cred iQ, at the end of 2024, more than 10% of all US commercial properties backed by commercial mortgage-backed securities (CMBS) were distressed.