- CRE debt origination jumped 49% year-over-year in the first half of 2025, surpassing pre-pandemic levels. Office, senior housing, and hotels drove the gains.
- Lending activity rose even as the number of active lenders stayed below pre-2020 levels. The market faces $2 trillion in debt maturities over the next two years.
- About $591B of loans maturing in 2025–2026 may face trouble. Many were originated during the ultra-low interest rate period.
A Sharp Rebound
The first half of 2025 saw CRE debt origination volumes exceed pre-pandemic norms, per Globe St. Volumes rose 49% compared with the same period in 2024, according to Newmark’s Q2 capital markets report. Office, senior housing, and hotel deals fueled most of the growth. The number of active lenders, however, remains well below past-cycle levels.
Debt Market Dynamics
Bank lending came in 1% above first-half averages from 2017 to 2019. This jump comes as the industry braces for a wave of maturities. Nearly 37% of the $2 trillion in debt set to mature by 2027 originated when the federal funds rate was under 0.25%. That compares with 4.33% today. Higher rates make refinancing tougher. Newmark projects $591B in loans could be “potentially troubled,” with office debt facing the most risk.
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Equity Market Shifts
Investment sales volume climbed 16% year-over-year. Even so, it remains 16% below the 2017–2019 average. Office sales rose 26%. Multifamily transactions gained 6%. Smaller deals under $100M dominated recent activity, accounting for 63% of the past year’s trades. Larger deals are starting to regain share. Institutional investment is up 9% over 2024, while private and owner/user buyers set a record market share.
Capital And Pricing Trends
Closed-end funds hold $327B in dry powder, down 18% since late 2022. Most of this capital targets residential and industrial assets. Much of it comes from older fund vintages. Cap rates have begun to stabilize but remain historically compressed. Investors are betting on a rebound in property fundamentals and values.
Market Outlook
All property sectors posted positive total returns in Q2. Office also improved, with 93% of tracked markets in the green. Debt availability has strengthened. Still, without spread normalization, transaction volumes will likely stay below pre-pandemic highs.
