C
ommercial real estate lending continued to recover in the second quarter of 2025, driven by banks and alternative lenders. However, caution remains due to government policy uncertainty and economic factors affecting treasury yields, according to CBRE's latest research.

    The CBRE Lending Momentum Index rose 45% year-over-year, despite a 6% decline from the first quarter as tariff announcements weighed on borrowing conditions in April and May. The index rebounded strongly in June, closing the quarter at 275, surpassing the five-year pre-pandemic average of 229.

    Commercial mortgage loan spreads widened to an average of 193 basis points (bps) in the second quarter, up by 10 bps compared to the same period last year and the first quarter. Multifamily loan spreads narrowed by 22 bps to 150 bps, driven primarily by tighter agency loan pricing.

    "Despite initial challenges, capital markets have demonstrated remarkable resilience," said James Millon, president of CBRE's Capital Markets division. "As clarity improved on tariffs, credit spreads tightened, and capital returned with risk-adjusted expected returns aligned to current market conditions."

    Alternative lenders led non-agency loan closings in the second quarter, capturing a 34% share, up from 32% last year. Debt funds drove much of this increase, with lending volumes rising 89% quarter-over-quarter and 52% year-over-year.

    Banks held the second-largest share of non-agency loan closings at 24%, down from 29% last year but with a 17% growth in origination volume. Life companies accounted for 23% of non-agency loan volume, while CMBS lenders saw increased activity, with their share rising to 19%.

    Tighter corporate borrowing spreads led to slightly looser underwriting standards, with loan constants falling by 21 bps and mortgage interest rates by 16 bps quarter-over-quarter. The average Loan-to-Value Ratio (LTV) rose to 63.3%, signaling a less conservative lending environment.

    Government agency lending for multifamily assets reached $28.9 billion in the second quarter, reflecting a 31% quarter-over-quarter rise and a 43% year-over-year increase. CBRE's Agency Pricing Index fell to 5.7%, down 13 bps from the previous quarter and by 28 bps from the same period last year.