C
ommercial real estate lending continued its upward trend in Q3 2024, with a notable increase in acquisition financing and strong issuance across asset classes. The CBRE Lending Momentum Index rose by 13% from Q2 2024 and 15% year-over-year, indicating enhanced lending activity.

    The average spread on closed commercial mortgage loans decreased to 183 basis points (bps), down 35 bps from the previous year and stable from Q2 2024. Multifamily loan spreads narrowed slightly to 168 bps for the quarter.

    Acquisition financing increased in Q3 due to attractive leverage, with large office transactions in New York City highlighting the return of debt liquidity for high-quality assets backed by top-tier institutional sponsors at conservative leverage. Recent base rate cuts and expectations for further Federal Reserve rate reductions have led some lenders to capitalize on improved capital markets through significant loan sales.

    Life companies led non-agency loan closings, accounting for 43% of the total in Q3 2024, up from 33% a year prior. Alternative lenders, including debt funds and mortgage REITs, held a 34% share, with debt fund origination volume surging by 70% over the past year.

    CMBS conduits accounted for 5% of origination volume in Q3 2024, while total CMBS issuance reached $29 billion, a threefold increase over the previous year. Underwriting standards saw slight changes, with average underwritten cap rates and debt yields rising to 6% and 9.9%, respectively.

    Government agency lending on multifamily assets grew significantly, up 40% to $28 billion in Q3 2024. The CBRE Agency Pricing Index declined to 5.8% in Q3 2024 from 6% in Q2 but rose from 5.7% a year ago.