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ommercial and multifamily mortgage originations surged in the first quarter of 2025, up 42% from the same period last year. This growth is a strong signal of renewed momentum in key real estate sectors despite ongoing volatility in interest rates.

    The office sector led the gains with a 205% increase in loan originations compared to Q1 2024, followed closely by health care property lending at 159%. Multifamily loans rose by 39%, while hotel property originations increased by 30%. In contrast, industrial and retail properties saw declines of 2% and 3%, respectively.

    Investor participation also rose year over year, with depository institutions increasing their lending volume by 83% and life insurers boosting activity by 61%. Commercial mortgage-backed securities (CMBS) originations rose 37%, while government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac increased lending volume by 20%.

    Quarterly activity saw a seasonal decline, with total originations falling 40% compared to Q4 2024. Office lending was the only segment to increase quarter-over-quarter, up 44%. The Federal Reserve Bank of Kansas City's CRE Index rose from -0.76 to 0.40, indicating regional activity now sits slightly above its historical average.

    The gains in the index were largely driven by ongoing construction and property completions, but the influx of new commercial space has tempered rents in several segments. Construction activity continued to rise through the start of the year, leading to a stall or decline in rents across several CRE segments within the KC Fed region.