Bank CRE Lending Climbs Amid Uncertainty

Steady Growth in Bank CRE Lending

Commercial real estate lending at US banks gained momentum through Q4 2025, closing out a year of sustained origination increases. According to Trepp’s latest data, the sector saw commercial mortgage originations not only rise quarter-over-quarter, but also exceed volumes observed during the height of early-pandemic disruption, when quarterly activity hovered between $5B and $6.4B. The growth bucked the typical early-year slowdown and reflected improving sentiment around CRE credit performance.

Performance Improves but Geographic Risks Persist

Bank CRE loan performance showed notable improvement in Q4 2025, fueled by the expanding origination pipeline and stabilizing fundamentals. Delinquency rates dipped for the second straight quarter, reaching 1.83%. Despite these positive trends, office loan distress remains a concern, mainly affecting large gateway MSAs. Markets such as Los Angeles, Atlanta, Seattle, and New York continue to report criticized loan rates at or above 40%, highlighting persistent vulnerabilities in the office sector.

Geopolitical Pressures Loom Over Outlook

Despite healthier loan performance, broader risks are emerging. The ongoing conflict in Iran has triggered an uptick in oil and commodity prices, fueling fresh concerns over inflation and the potential for slower economic growth. At the same time, shifting capital market signals—from tightening spreads to softer yields—are already pointing to a more cautious lending environment across asset classes. These developments could dampen the current momentum in bank CRE lending and impact market confidence moving into 2026.