Commercial real estate lending gained strong momentum in the final quarter of 2024, fueled by solid market fundamentals, a surge in maturing debt, and ample capital availability.

Lending Activity Surges

The CBRE Lending Momentum Index climbed 21% from Q3 and 37% year-over-year, closing the quarter at 259, well above the pre-pandemic five-year average of 229. Spreads on commercial mortgage loans averaged 184 basis points (bps), with multifamily loan spreads tightening to 156 bps, their lowest level since 2022.

Banks Lead the Charge

Banks took the largest share of non-agency loan closings in Q4, increasing their market share to 43% from just 18% in the previous quarter. This growth was driven by loan payoffs and a more accommodating regulatory environment. Life insurance companies followed with a 33% share, while alternative lenders, including debt funds and mortgage REITs, accounted for 23%. Debt fund origination saw a notable 72% year-over-year increase, reflecting a heightened risk appetite.

Multifamily Lending Takes Off

Government-backed lending for multifamily properties soared 87% in Q4 to $53 billion, bringing total annual originations to $120 billion, 19% from the previous year. The CBRE Agency Pricing Index dropped to 5.4%, its lowest point since mid-2023, signaling improved financing conditions.

Looking Ahead

With a significant volume of maturing debt and capital reallocation on the horizon, refinancing and investment sales are expected to drive activity in 2025. Prime office assets in major central business districts may experience a recovery, while lenders will likely turn to loan sales to manage liquidity and restructuring efforts.