**CRE Investment and Lending Activity Improves in Q2 2025**
Headlines from the second quarter of 2025 were dominated by concerns over tariff uncertainty and its impact on economic volatility. Despite these challenges, commercial real estate (CRE) financing showed notable resilience and growth. According to CBRE, its Lending Momentum Index surged by 45% year-over-year, signaling a strong uptick in lending activity across the sector.
Total CRE investment during the quarter reached $96.9 billion. While cross-border investment dropped to $3.9 billion, domestic capital deployment remained robust.
Key findings for Q2 2025 include:
– **Alternative lenders** comprised 34% of all non-agency lender closings, marking a 32% increase compared to the previous year.
– **Commercial Mortgage-Backed Securities (CMBS) lenders** also rebounded, representing 19% of non-agency loan closings—a 9% jump year-over-year.
– **Banks** accounted for 24% of non-agency loan activity. Although this reflects a 29% year-over-year drop in market share, their origination volume increased by an impressive 70%.
– **Life companies** captured 23% market share in non-agency lending, a 29% decline from 2024.
Jaeyoung Kim, Associate Director of Capital Research at CBRE, noted that while economic uncertainty initially hampered activity, conditions improved as markets gained confidence in trade negotiations.
“Credit spreads tightened to more balanced levels, which helped boost origination across all lender types,” Kim said. “As policy clarity improved, all lender categories remained active. Private credit lenders and CMBS, in particular, saw the greatest increase in volume.”
Kim added that expectations shifted in response to evolving policy decisions. “Things turned out better than anticipated in early April 2025, but with hindsight and market adaptation, we weren’t particularly surprised by where we ended up.”
Additional Highlights from CBRE’s Q2 2025 Report:
– **Private investors** dominated investment activity, accounting for 62% of Q2’s volume—a 60% year-over-year increase. In contrast, **institutional investment** dropped by 39%, primarily due to the impact of the 2024 AIR Communities transaction.
– The **NCREIF Property Index** posted an annualized return of 4.3% in Q2. By sector, **retail** had the highest return at 7.6%, followed by **multifamily** at 5.0%.
– The **average spread for multifamily mortgages** fell by 22 basis points year-over-year to 150 basis points.
– **Underwriting standards** were relaxed slightly, with average loan-to-value (LTV) ratios increasing to 63.3% and debt service coverage ratios decreasing to 1.34.
Kim emphasized that despite intermittent fluctuations, market participants remained committed to capital deployments. Looking ahead, CBRE forecasts continued momentum, driven by the market’s adaptability and strong deal pipelines.
“Although there are economic and policy-related headwinds, these challenges are unlikely to derail capital deployment or lending and investment activity,” Kim asserted. “With anticipated Federal Reserve rate cuts and stability in longer-term yields, we expect borrowing conditions to remain favorable through the rest of the year.”
