- Multifamily CLO lending hit $19.7B in 2025, tripling the prior year’s total.
- Over two-thirds of CLO loans in 2025 backed multifamily assets.
- Lenders and borrowers are betting on rent growth as new construction slows.
- Banks are shifting capital to private lenders, fueling the CLO market’s resurgence.
Multifamily Activity Drives CLO Surge
Bisnow reports that the multifamily market spurred a wave of collateralized loan obligation (CLO) activity in 2025. Volume reached $19.7B, according to Moody’s. CLO lending—often used for apartment renovations and lease-ups—became a preferred capital source. Investors turned to it as they managed volatile asset performance and awaited returns on their 2021 investments. More than two-thirds of this lending targeted multifamily assets. It marked the busiest CLO year since the 2021 investment peak.
Flexible Loans for a Challenging Cycle
CLOs are structured as floating-rate bridge loans, typically three to five years long. They are designed for properties still seeking stabilization. As loans from earlier cycles matured with assets not ready for permanent financing, borrowers pursued new short-term options. Multifamily CLOs offered active management and forward-looking underwriting. These features appealed to both lenders and investors seeking flexibility in uncertain markets and a declining floating-rate environment. At the same time, rising distress levels across maturing CLOs have underscored the urgency of refinancing solutions for borrowers navigating expiring debt.
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
Sun Belt Markets and Rent Pressures
Sun Belt cities like Austin, Phoenix, and Atlanta saw rent declines and higher vacancy rates as new supply outpaced demand. In Austin, multifamily rents dropped as much as 30% due to aggressive concessions, increasing pressure on floating-rate borrowers. With construction starts at their lowest since 2020, stakeholders are betting that a stabilized pipeline will support gradual rent increases in the coming year.
Banks Push Capital to Private Lenders
Banking regulations, particularly under Basel III, have encouraged banks to allocate funds to private lenders rather than direct real estate loans. This trend has fueled a broader shift toward private lending groups utilizing multifamily CLO structures. Market participants expect continued growth in multifamily CLO activity as traditional banks cede lending ground to flexible, non-bank strategies.
