Lending is Back: Signs of Life in the CRE Financing Market
After years of pandemic-driven uncertainty and a financing drought, capital is flowing back into commercial real estate. According to the Mortgage Bankers Association, loan volumes surged to $539 billion in 2024, reflecting a 26% year-over-year increase.
What’s fueling this resurgence? Debt funds and alternative lenders are stepping in to fill the gaps left by traditional banks. However, most financing deals remain short-term due to high borrowing costs and continued uncertainty in property valuations.
Landmark Deals:
Rockefeller Center recently secured a record-breaking $3.5 billion loan led by Bank of America and Wells Fargo.
The Fontainebleau Miami Beach closed a $1.2 billion refinancing deal, pushing 2024 hospitality CMBS activity to its highest levels since the Great Recession, surpassing $24 billion.
These headline transactions signal that lenders are eager to finance premium properties while maintaining caution on long-term commitments.
Office Sector: A Tale of Two Markets
While financing activity is returning, challenges remain—particularly in the office sector. Older office buildings in central business districts (CBDs) have seen values drop by 50.7% since 2021 (MSCI data). High vacancy rates and the continued shift to hybrid work models are adding pressure on landlords.
By contrast, trophy office properties are thriving. These modern, amenity-rich buildings command rents exceeding $100 PSF nationwide, with top-tier markets like New York reaching as high as $247 PSF.
For investors, this bifurcation highlights the importance of quality and location when evaluating office opportunities.
The Debt Wall: Navigating the $1 Trillion Maturity Wave
One of the biggest challenges ahead is the looming wave of debt maturities. Over $1 trillion in CRE loans will mature by 2026, forcing landlords to confront higher refinancing costs in a higher-rate environment. Borrowing costs have risen from an average of 3.5% in 2021 to 6.74% in 2024.
With property values under pressure and long-term financing options limited, many landlords are turning to short-term solutions to bridge the gap. For savvy investors, this creates opportunities to provide liquidity or acquire distressed assets at discounted valuations.
Why 2025 Could Be the Best Entry Point in 15–20 Years
Despite the challenges, industry leaders see 2025 as a rare investment opportunity. Yields are at decade highs, and inflation-adjusted property prices are at historic lows. According to Michael Acton of AEW, today’s uncertainty—often referred to as the “fog of war”—creates prime conditions for smart capital deployment.
Blackstone’s Nadeem Meghji echoes this sentiment: “When sentiment is negative, and recovery isn’t obvious, that’s the time to invest.”
For investors willing to act, the combination of low valuations, strong yields, and increasing financing availability makes this a compelling moment to move off the sidelines.
Key Takeaways for CRE Investors
Financing is Returning: Loan volumes are rebounding, with alternative lenders filling the void.
Focus on Premium Assets: Trophy office properties and hospitality assets are attracting the most capital.
Prepare for the Debt Wall: Refinancing challenges could create opportunities for investors with access to liquidity.
Act on Market Dislocation: History shows that uncertain times often present the greatest investment opportunities.
Looking Ahead: How INSIGNIA Financial Services Can Help
At INSIGNIA Financial Services, we help investors and property owners navigate complex market dynamics. Whether you’re exploring opportunities in office, hospitality, or other CRE sectors, our team specializes in arranging tailored financing solutions that align with your strategy and goals.
As the market continues to shift, positioning yourself ahead of the curve will be critical. If you’re ready to explore opportunities in what could be the best entry point in 20 years, connect with us today.
Your next investment opportunity awaits.
