- Commercial real estate (CRE) lending is forecast to grow 30% this year and another 35% in 2026, according to Marcus & Millichap and the Mortgage Bankers Association.
- Private investors are driving the recovery, accounting for nearly 60% of CRE deal flow in H1 2025.
- Easing interest rates, stronger capital inflows, and improving bank engagement are boosting liquidity across the CRE sector.
Investment Momentum Rebounding
After two years of sluggish transaction volume, the CRE market is showing signs of recovery, reports GlobeSt. According to Marcus & Millichap, deal activity is expected to rebound to levels last seen in 2016, driven largely by private investors and renewed bank engagement. In the first half of the year, private buyers made up 59% of all CRE transactions.
The recovery follows a sharp downturn in activity starting in 2022, when interest rate hikes pushed many assets into negative leverage, making financing less attractive. Combined with tighter credit conditions and limited capital availability, deal volume fell to 10%–15% below the 2014–2019 average.
Capital Inflows Regaining Ground
Investment funds targeting CRE raised an average of $30B per quarter in the first half of the year. That figure is well below the $68B quarterly peak seen in 2021. However, it is slightly above the 10-year average of $28B. However, capital per fund remains lower, indicating broader but more modest participation: 180 funds averaged $173M each per quarter, compared to $397M during the market peak.
Get Smarter about what matters in CRE
Stay ahead of trends in commercial real estate with CRE Daily – the free newsletter delivering everything you need to start your day in just 5-minutes
Banks Slowly Returning To The Market
Following a period of portfolio rebalancing, banks are cautiously re-entering the CRE lending space. Lending standards have loosened slightly, with loan-to-value (LTV) ratios rising to an average of 56% for nonresidential properties and 62% for multifamily deals.
The shift is part of a broader trend toward increased lending activity. The Mortgage Bankers Association projects CRE lending volume to rise 30% in 2025 and another 35% in 2026, signaling a sustained recovery.
Cost Of Capital Trending Down
As interest rates ease, borrowing costs for multifamily agency debt have fallen into the low 5% range, while broader CRE debt ranges from the low to mid-6% range. Meanwhile, average cap rates have risen by up to 120 basis points since 2022, creating more favorable investment conditions.
Outlook: More Deals Ahead
The combination of rising cap rates, falling interest rates, and more active lenders could accelerate investment activity through the remainder of 2025 and into 2026. With liquidity improving and private capital stepping up, CRE appears poised for a lending surge in the near term.
