A sharp jump in originations hints at recovery, but upcoming loan maturities could shake things up
Commercial and multifamily lending rebounded sharply in late 2024, setting the stage for continued growth this year.
Total commercial and multifamily loan originations are expected to climb 16% to $583 billion in 2025, with multifamily lending projected to reach $361 billion, according to the Mortgage Bankers Association’s (MBA) latest forecast.
The resurgence was evident in the final quarter of 2024, where loan originations surged 84% year-over-year. The increase was largely driven by a temporary dip in interest rates and a post-election boost in market sentiment, bringing lending activity back to 2022 levels.
However, with nearly $957 billion in commercial mortgages set to mature in 2025 – a 3% increase from 2024 – rising refinancing costs and ongoing rate uncertainty could create headwinds for borrowers navigating loan renewals.
Borrowers return to market
The late-year lending surge across all major property types reflected renewed confidence in the market. Hotel properties saw the sharpest increase, with loan originations jumping 124% from a year earlier. Office lending followed closely, rising 105%, while industrial loans climbed 94%. The healthcare sector also saw significant growth, with lending increasing 72%, followed by multifamily at 69%, and retail properties at 48%.
Lender activity also picked up across different capital sources. Commercial mortgage-backed securities (CMBS) saw the most dramatic increase, with loan originations soaring 128% year-over-year. Depository institutions increased lending by 94%, while investor-driven lenders saw an 81% jump. Government-sponsored enterprises (GSEs), including Fannie Mae and Freddie Mac, also expanded their lending footprint, with activity rising 72%.
MBA chief economist Mike Fratantoni noted that the late-year improvement was a welcome shift after a prolonged slowdown.
“The significant, but brief, dip in interest rates in September, followed by a pickup in market sentiment post-election, resulted in more business, with origination activity back to 2022 levels,” he said in the report.
“The triple-digit percentage increases in the origination indexes certainly reflect this bounce off a low base. With interest rates moving up again to start 2025, we will have to see how origination activity responds through the first quarter. However, MBA still expects more borrowing and lending in 2025.
Rising loan maturities
While new loan originations are expected to grow, a record volume of maturing commercial mortgages poses a challenge for borrowers. MBA estimates that $957 billion in commercial mortgages will come due in 2025, a significant increase over the previous year.
Many property owners had anticipated lower interest rates in 2024 and deferred refinancing in hopes of securing more favorable terms. However, with long-term borrowing costs holding steady, some borrowers could face difficulties renewing their loans under current conditions.
“Many loans that might have matured in 2024 have been extended into 2025, with the aggregate results showing a 3% increase in total commercial mortgages maturing this year,” Fratantoni said.
The burden of maturing loans varies by property type. The hospitality sector is facing the steepest challenge, with 35% of hotel loans set to mature this year. Office properties are also under pressure, with 24% of loans coming due, while 22% of industrial property loans will need refinancing. Retail and healthcare loans will see 18% mature, and 14% of multifamily loans—excluding those held by depositories—are also scheduled for renewal.
From a lender perspective, depositories hold the largest share of maturing commercial mortgages, with $452 billion in outstanding balances. CMBS, CLOs, and asset-backed securities account for another $231 billion, while credit companies, warehouse lenders, and other financial institutions are managing $180 billion in upcoming maturities.
2025 lending outlook
Despite the Federal Reserve’s 100-basis-point rate cut in 2024, long-term rates remained elevated, limiting refinancing opportunities for many borrowers. MBA expects rates to remain within a trading range in the coming years, though economic shifts could create additional volatility.
“Longer-term rates are likely to remain rangebound for the foreseeable future, and the path to work through these maturities will remain challenging,” Fratantoni said.
Economic growth is also expected to slow, with a weaker job market potentially influencing future rate decisions. While MBA predicts an overall increase in commercial and multifamily loan originations in the next two years, Fratantoni acknowledged the need for flexibility in navigating the changing landscape.
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“We expect an increase in originations across property types and capital sources, but certainly recognize the additional challenges posed by the large number of loans scheduled to mature in 2025,” he said.
Despite near-term refinancing challenges, MBA remains optimistic about the long-term trajectory of commercial and multifamily lending. By 2026, total originations are forecast to reach $709 billion, with multifamily lending climbing to $419 billion.
“There are still plenty of challenges in commercial real estate, but there are also signs of stabilization,” Fratantoni said. “Given the strong pickup in origination activity at the end of 2024, it appears that at least some borrowers and lenders are ready to move.”
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