Commercial Real Estate Lending Slows in Q1 2024, but Shows Signs of Stability

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The commercial real estate lending market witnessed a slowdown in the first quarter of 2024, attributed to elevated interest rates and restricted credit accessibility. However, there were indications of stabilization as credit spreads tightened, according to CBRE’s latest research.

CBRE’s Lending Momentum Index, tracking the pace of CBRE-originated commercial loan closings in the U.S., declined by 11% from the previous quarter. Compared to the robust loan volume of the first quarter of 2023, the index exhibited a notable decrease of 32.7%, closing at a value of 168 for Q1 2024.

Credit spreads, measured between the 10-year Treasury yield and seven-to-10-year fixed-rate permanent commercial loans with loan-to-value ratios of 55% to 65%, contracted by 22 basis points quarter-over-quarter, settling at 212. Similarly, multifamily spreads tightened by 17 basis points to 175.

James Millon, U.S. President of Debt & Structured Finance for CBRE, remarked, “While the commercial real estate lending market experienced a slowdown in the first quarter, this was primarily influenced by market conditions in the third and fourth quarters of 2023. Looking forward, we are seeing an uptick in activity, particularly driven by institutional investors seeking to recycle capital.”

He added, “With investment sales down, we are seeing a shift towards hard maturity refinancings, construction loans, and bridge lending, which is expected to continue until there is consensus on rate cuts. While commercial banks are reducing their presence in the market, the combination of agency, life companies, CMBS, and debt funds continues to support credit availability. Credit spreads remain favorable, but the challenge lies in securing accretive financings on core assets due to higher benchmarks.”