Loan-to-Value Ratios Climb as CRE Lender Competition Heats Up

Commercial real estate borrowers are getting more leverage, with average loan-to-value ratios rising to 65.9% in the first half of 2026, according to MSCI’s August 2026 Capital Trends report as covered by GlobeSt. That’s up 170 basis points from a year earlier, as banks expanded lending and debt funds kept gaining ground.

The climb in loan-to-value ratios marks a recovery from the capital rationing that followed the 2022 interest-rate shock, and it gives borrowers more financing options than they’ve had in several years.

Back From the Lending Crunch

LTVs fell after rates spiked in 2022 and lenders pulled back. Now, more competition, particularly from lenders that don’t face bank and insurer regulation, is pulling leverage back up.

Jim Costello, co-head of MSCI’s real-assets research team, told GlobeSt the data doesn’t conclusively show lenders taking on materially more risk. He framed the move as a return from unusually restrictive conditions and noted that part of the increase may reflect a shifting mix of loan sizes and property types.

Smaller properties tend to carry higher LTVs, and regional and local banks, whose average loan size was roughly $6.4M in 2026, have historically been among the higher-leverage lenders.

The Details

Banks were the biggest winners. Their share of commercial property lending rose to 39% in the first half of 2026 from 34% a year earlier, back in line with their 10-year average, per MSCI.

National banks led the charge, growing lending volume 75% year over year and lifting market share 3 percentage points to 14%. Their average LTV rose 220 basis points to 65.9%, the group’s highest level since 2015. For owners of stabilized assets with larger financing needs, that returning capacity sharpens pricing tension among lenders.

Regional and local banks grew their share to 21% from 18% and handled 60% of loans of $10M or less. Investor-driven lenders, including debt funds, expanded to a 16% share from 13%, with an average LTV of 69.5%, the highest of any lender group MSCI tracks.

Agencies and CMBS Cede Ground

Government agencies moved the other way. Their market share fell 6 percentage points to 17% even as their lending volume held roughly flat, meaning the market simply grew around them.

The shift was sharpest in apartments, where agencies accounted for 38% of originations, down 12 points from a year earlier and well below their roughly 50% average over the past decade. Agency LTVs still rose to 63% from 61%, a move Costello called notable because the agencies’ apartment focus makes the comparison cleaner.

Banks and other lenders appear to be winning apartment business that might once have defaulted to agency channels.

Insurance companies posted the biggest LTV jump, up 250 basis points to 62.7%, while their share slipped to 9%. CMBS lending lost a point of share to 18%, though average CMBS loan size climbed to $35.3M in 2026 from $12.1M in 2020.

Why It Matters

Office shows how far debt funds are widening the financing window. Investor-driven office lending volume rose 191% year over year, and the group’s share of office lending reached a record 18%, per MSCI.

For borrowers, financing now hinges more on the specific asset and business plan than on property type alone. Debt funds can step in where banks or agencies won’t, though often at a cost in pricing, structure and refinance risk.

Bank momentum isn’t uniform across regions, either, with lenders in the Dallas Fed district reporting slower loan growth on commercial real estate.

What’s Next

A deeper lender bench should give the market a cushion if conditions turn volatile, since no single lender type now sets terms for every borrower. Watch whether national banks keep pushing leverage higher and whether agencies win back apartment share.

Higher leverage isn’t a free pass. Borrowers still need to weigh the cost and durability of their debt, with property values, rates and capital markets conditions still unsettled.