- Regional banks expect renewed commercial real estate lending growth in 2026.
- Lower interest rates are improving loan economics and developer confidence.
- Lending growth is strongest in multifamily and stabilized sectors.
- Banks view credit quality as stabilizing with fewer problem loans.
Regional Banks Eye Lending Rebound
According to CoStar, major US regional banks are projecting a recovery in commercial property lending for 2026, following several years of reduced exposure. Led by institutions like Regions Financial, PNC, M&T Bank, First Horizon, US Bancorp, and KeyCorp, these lenders report easing market headwinds and a stabilizing credit environment.
The shift signals a possible turning point for commercial real estate finance after post-pandemic retrenchment and office value declines. Executives noted that lower interest rates, which began with Fed cuts in late 2024, are making more deals financially viable and are boosting optimism for portfolio growth.
Interest Rates Restore Balance
Regions Financial and others highlighted how recent interest rate cuts have improved debt metrics for borrowers and made new projects, particularly in multifamily, more attractive. Lower rates have also reduced friction with developers who faced higher down payment requirements just a year earlier.
Regions noted that a wave of 2025 refinancing activity limited loan growth, but this drag has now eased. With rate stability, lenders see the potential for new commercial real estate commitments across multiple sectors.
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Bank-by-Bank Outlook
At PNC, executives expect moderate commercial lending growth in 2026, with hopes for more significant gains in the year’s first half. M&T Bank reported its commercial loan balances declined at a much slower rate, with problem loans now at their lowest since 2007.
First Horizon’s commercial real estate loan declines slowed to just $111M in Q4, while loan commitments rose modestly. US Bancorp said paydowns have slowed, and modest growth has resumed, focused mainly on multifamily and industrial. Meanwhile, KeyCorp projects lending to be flat on average in 2026, though up 3% by the year’s end, as more property sales come to market.
Much of the caution remains centered on office exposure, which continues to weigh on lending strategy even as credit quality shows signs of stabilizing.
What’s Next
Regional banks’ plans suggest commercial real estate lending growth will pick up in 2026, albeit at a gradual pace. Multifamily and stabilized sectors are likely to see the strongest gains as lenders watch for sustained economic momentum and improved property values. With credit quality improvements and continued rate support, regional banks are resetting their approach to commercial property finance for the near term.
