CRE lending hits 7-year high suggesting early stages of recovery.
Skyscrapers in the financial district of London.
Photographer: Chunyip Dilts/Bloomberg
CRE lending hitting a 7-year high suggests we may be entering the early stages of a recovery phase in the real estate cycle, following a period of contraction and credit tightening.
Here’s how this development fits into the broader real estate cycle:
CRE Lending Surge: A Sign of Thawing Credit Conditions
• CRE loan demand rose for the first time since early 2022, according to the Federal Reserve’s Q3 2025 Senior Loan Officer Survey credaily.com.
• Core commercial properties saw a +10% net increase in loan demand, a dramatic swing from -11.5% the previous quarter credaily.com.
• Lending standards are stabilizing, with fewer banks tightening credit—only 3.8% net tightened standards in Q3 vs. nearly 10% in Q2 credaily.com.
Where We’ve Been: Contraction Phase
• Since 2022, the CRE market has faced rising interest rates, declining asset values, and tighter lending standards, especially in office and construction sectors Harvard B... +1.
• Delinquency rates have climbed, and banks with high CRE exposure have faced stress, including capital infusions to offset losses Harvard B... +1.
• This aligns with the contraction phase of the real estate cycle: falling prices, reduced transaction volumes, and limited credit availability.
Where We’re Heading: Early Recovery?
• The recent lending rebound, paired with a 17% year-over-year increase in transaction volumes, points to renewed investor confidence and liquidity returning to the market credaily.com.
• Multifamily and core commercial sectors are leading the rebound, while construction and land development remain subdued—typical of early recovery dynamics credaily.com.
• If this trend continues, we could be transitioning into the expansion phase, marked by rising prices, increased development, and broader capital availability.
What to Watch Next
• Sustained loan demand across sectors, especially construction and development.
• Cap rate compression and asset price stabilization.
• CMBS delinquency trends, particularly in office and retail.
• Fed policy shifts—any rate cuts or dovish signals could accelerate the recovery.