- The Federal Reserve Bank of St. Louis reports that CRE lending growth reached its lowest rate in 11 years in Q4 2024.
- Despite the slowdown, lending activity rebounded in Q1 2025, with indexes from CBRE and Newmark showing strong year-over-year gains.
- The apparent contradiction stems from different data perspectives—growth rate vs. growth momentum—highlighting diverging short-term activity and long-term trends.
- Tighter lending standards, reduced demand, and high construction costs are contributing to the slowdown in sustained bank lending growth.
A Divergence in the Data
The commercial real estate lending landscape is sending mixed signals, per Globe St. While overall CRE lending growth by US banks slowed to an 11-year low in Q4 2024, new data also points to a rebound in loan activity earlier this year. A report by CBRE, based on Federal Reserve data, found that although banks still held more CRE debt year-over-year, the rate of growth had slowed dramatically—from 13.2% in early 2023 to just 0.32% by April 2025.
At the same time, recent market indicators suggest a notable rebound in CRE lending activity. CBRE’s Lending Momentum Index jumped 13% quarter-over-quarter and 90% year-over-year in Q1 2025, with banks accounting for 34% of non-agency closings—up from 22% the year prior. Newmark’s Q1 Capital Markets report echoed the momentum, noting CRE debt origination was up 42% year-over-year.
How Can Lending Be Up and Down at the Same Time?
The contradiction is more about measurement than market confusion. The Fed’s St. Louis analysis tracks the rate of change in overall bank lending (a second derivative), not the absolute volume of new loans or quarterly activity. In contrast, reports from CBRE and Newmark focus on recent CRE lending volume and origination activity.
So, while more loans are being made compared to last year, the growth in those loan volumes is slowing—pointing to potential stagnation or even decline if trends continue.
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Why Lending Growth Is Slowing
According to the Fed’s April 2025 Senior Loan Officer Survey, most banks reported unchanged or tighter CRE lending standards, and demand was either flat or weakening. Add to that the mounting costs of construction—land, labor, materials—as well as higher taxes, insurance, and interest rates, and many projects are struggling to remain financially viable.
The slowdown could soon reverse the total growth trend. If lending volumes begin to fall, it would mark the first such decline since September 2009, during the aftermath of the Great Financial Crisis.
Looking Ahead
While Q1 data shows a promising pickup in transaction volume, the long-term trajectory of bank CRE lending is clearly under pressure. With economic headwinds persisting, whether the current uptick can be sustained remains an open question for developers, lenders, and investors alike.
