- Banks have reduced their CRE lending share by about 17% since pre-pandemic levels, now holding roughly 33% of the market.
- After a sharp decline following the 2023 banking turmoil, lending activity has started to recover, though unevenly.
- Institutions are re-entering the space cautiously, facing tighter standards, legacy loan issues, and more competition from private capital.
A Cautious Return
Banks are slowly stepping back into CRE lending after a years-long pullback, per GlobeSt. The retreat was driven by the pandemic and 2023’s high-profile bank failures. They now face a changed market shaped by rising interest rates, tighter regulation, and weakening fundamentals—especially in office and multifamily.
By the Numbers
At the end of 2024, banks and thrifts held 37.6% of the $4.79 trillion in outstanding commercial mortgages. That’s down from 39% in 2019. Their share of new originations has dropped even more, falling to about 33%, a 17% decline from pre-pandemic levels.
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
A Volatile Lending Landscape
CRE lending by banks peaked at $75.5B in December 2022. It then swung to -$4.1B by March 2025, before rebounding slightly to $3.2B in April. According to the Fed’s April 2025 loan officer survey, standards for nonresidential property loans remain tight. Multifamily loan standards, however, have mostly held steady.
New Rules, New Risks
CBRE’s Ty Gerschick says banks want to re-enter the market, but the environment has changed. They’re dealing with underperforming office loans and pressure to generate new business. Many are selling troubled loans at a loss, clearing space for healthier assets. Investors are showing interest in these assets, as long as they produce cash flow.
Signs of Life
CBRE data shows lending activity picked up in late 2024, especially among banks closing non-agency loans. Still, the recovery is not even. Michael Fratantoni of the Mortgage Bankers Association notes that while the mood is improving, lenders remain cautious. The past few years left deep marks.
Why It Matters
CRE lending is still a major part of bank portfolios. A cautious comeback may help ease financing bottlenecks. But tighter underwriting and greater involvement from private lenders suggest a new long-term normal.
What’s Next
Expect banks to stay selective, with more careful loan structures and pricing. The tone is shifting, but few expect a full return to pre-pandemic lending behavior anytime soon.
