Lessors of Nonresidential Buildings NAICS 531120

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%).

• Office property insiders suggest it may take years for the office sector to recover as so-called zombie buildings cast a long shadow over business districts across the country, according to The Wall Street Journal. Investors, often private equity firms, that own large office buildings, bought them with money borrowed from issuing bonds called commercial mortgage-backed securities. Some of those building owners have written their investments off as vacancy rates remained stubbornly high. Such buildings end up being controlled by bondholders in foreclosure. Bondholders are temporary landlords, often fighting amongst themselves in the effort to cash out. Such owners have little interest in making investments in buildings to attract tenants, and the buildings remain largely empty. Industry watchers say it may take years to reposition zombie buildings as tenants prefer newer offices in trendier areas.
• 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.