The Mortgage Bankers Association (MBA) is forecasting a major rebound in commercial and multifamily lending next year, signaling renewed momentum across the CRE sector.

A Comeback Year:

Total commercial and multifamily loan originations are expected to climb 24% year-over-year in 2025, reaching roughly $827 billion. Within that total, multifamily lending is projected to rise 16% to $417 billion, while non-multifamily loans are anticipated to hit $410 billion—growth driven by stronger asset performance and the impact of lower borrowing costs despite a sluggish economy.

The Rate Factor:

This bullish outlook depends heavily on further rate cuts by the Federal Reserve. Following the first reduction in September, the MBA anticipates two additional cuts, one in October and another in December. According to MBA Chief Economist Mike Fratantoni, the Fed’s focus has shifted away from inflation toward stabilizing a cooling labor market.

Multifamily Resilience:

Judie Ricks of the MBA noted that early 2025 has already shown solid year-over-year gains in multifamily originations, underscoring the sector’s staying power. Agency-backed loans remain dominant, representing more than 40% of 2024’s multifamily production, a sign that government-supported financing continues to anchor the market.

Looking Further Ahead:

While 2025 appears to mark a strong recovery, the MBA expects activity to moderate in subsequent years. By 2027, multifamily lending could edge up just 1% to $422 billion, while overall commercial real estate lending may decline 6% to $781 billion. Non-multifamily volume is projected to pull back to $359 billion, suggesting 2025 could represent the high point of this cycle.

Labor Market Watch:

Even with optimism about near-term lending, the MBA cautions that a weakening job market could become a drag. Unemployment is projected to reach 4.6% by late 2025 and peak at 4.7% in early 2026, potentially curbing consumer confidence and slowing deal activity.

➥ The Bottom Line:

The MBA sees 2025 as a bounce-back year for commercial and multifamily lending, powered by lower interest rates and resilient fundamentals. But with economic clouds on the horizon, the window for this resurgence may be short-lived.