Strong loan volume contrasts with steep decline in confidence following Trump's 'Liberation Day'
Commercial real estate (CRE) lending showed signs of life in 2024, rebounding from a tough 2023, but optimism among industry leaders has taken a sharp downturn heading into 2025.
According to the Mortgage Bankers Association’s (MBA) latest origination volume summary, total CRE borrowing and lending hit an estimated $498 billion last year. That’s a 16% increase from 2023’s $429 billion, but still far below the $816 billion recorded in 2022.
“Commercial real estate lending rebounded to $498 billion in 2024, up 16% from the prior year and driven largely by multifamily activity and continued strength from dedicated mortgage banking firms, which closed $411 billion in loans,” said Reggie Booker, MBA’s associate vice president of commercial real estate research. “While still below 2021’s record originations activity, the market showed renewed momentum. With an estimated $957 billion in CRE mortgage maturities coming due this year, demand for refinancing and new capital will be key drivers of market activity.”
Multifamily remains the primary engine of activity, accounting for $326 billion in total lending volume. Of that, $219 billion was handled directly by dedicated mortgage bankers. MBA’s data shows that first liens represented 92% of the total dollar volume reported by mortgage bankers.
In total, mortgage banking firms closed $411 billion in loans in their own name last year. They also served as intermediaries on $303 billion worth of loans and facilitated $247 billion in investment sales, underscoring their significant role in market liquidity.
Sentiment drops despite growth
Despite the lending rebound, industry sentiment has taken a significant hit. The CRE Finance Council’s (CREFC) 1Q25 Board of Governors Sentiment Index, released this month, shows a dramatic 30.5% decline, dropping to 87.9 from 126.6 in Q4 2024. It’s the second-largest quarterly drop ever recorded, trailing only the freefall seen at the start of the COVID-19 pandemic.
This steep fall follows President Trump’s "Liberation Day" tariff announcements on April 2, which sparked concerns about increased volatility and economic headwinds. The sentiment index now sits below the baseline of 100 for the first time since the pandemic, signaling widespread caution among CRE finance professionals.
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“The CRE finance industry finds itself at a genuine crossroads,” said Lisa Pendergast, president and CEO of CREFC. “The dramatic drop in our Sentiment Index clearly signals concern, but beneath the headline numbers we see pockets of cautious optimism, particularly regarding how lower interest rates might finally break the transaction logjam that has persisted through much of 2024.
According to the CREFC survey, geopolitical risks and trade tensions topped the list of industry concerns, with 59% of respondents citing them as major threats. Among those surveyed after the tariff announcement, 60% were “very” or “extremely” concerned about the impact of rising construction costs and delays in CRE development.
Additionally, 67% believe that federal lease terminations by the Department of Government Efficiency (DOGE) could have a moderately negative effect on office sector performance.
Still, a majority of respondents (80%) expect commercial mortgage-backed securities (CMBS) issuance to remain stable or experience only a moderate decline, even in a volatile market.
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