🏦 Banks Tiptoe Back Into CRE Lending — But Old Loan Troubles Still Haunt the Market ⚠️

📉 CRE Lending Rebounds in 2025 — Yet Troubled Debt and Maturity Risks Are Far From Over 💥

🏦 Banks Tiptoe Back Into CRE Lending — Even As Old Troubles Stick Around

After two years of tightening credit, frozen loan committees, and conservative underwriting, banks are finally stepping back into the commercial real estate (CRE) arena. But here’s the truth investors and borrowers need to hear:

Yes—banks are lending again.
No—the problems from the low-rate era aren’t gone.
And the next five years will be defined by slow-moving risk, not sudden collapse.

As a mortgage broker working directly with both investors and lenders, I’m seeing the same pattern: a lending thaw… but far from a clean slate.

🔥 Banks Are Lending Again — The Thaw Is Real

According to Newmark, banks originated $227 billion in CRE loans during the first nine months of 2025—an 85% year-over-year surge that finally returns origination levels to 2019 norms.

A few big shifts worth noting:

• Multifamily made up 50% of Q2 originations

• Office is seeing selective new financing—a sign that valuations finally hit clearing levels

• Regional banks are re-opening pipelines, though with tighter DSCR and lower leverage

• Bridge lenders and debt funds are being out-competed on rates again

This isn’t a boom. It’s simply a return to functioning credit markets—something the sector hasn’t seen since early 2022.

⚠️ But Legacy Problems Haven’t Gone Away

Even though banks are lending, they’re still dragging the weight of last cycle’s debt.

• CRE delinquencies sit at 1.56%, the highest since 2014

• At the nation’s largest banks, delinquencies hit 1.86%

• Nonperforming loans continue to rise despite the lending rebound

• Troubles are concentrated in:

  • office

  • older multifamily

  • hospitality in oversupplied markets

  • transitional assets with stalled business plans

Analysts warn that banks’ stability reflects caution, not improved fundamentals.

🧱 The “Extend and Pretend” Era Isn’t Over

Banks are still relying on loan modifications and short-term extensions to avoid realizing losses.

• $957 billion in CRE debt matures in 2025

  • Nearly half is held by banks

• $663 billion is coming due in 2026

  • Banks hold 46% of that exposure, more than any other lender class

• Instead of one giant “maturity wall,” the market now faces a rolling debt wave extending through 2030

This rewrites the entire risk timeline.
Instead of a crash → cleanup → recovery cycle… we’re on a slow-drip, multi-year workout cycle.

🌧️ Macro Risks Are Rising

While lenders are more active, macroeconomic clouds continue to darken:

• Rising stagflation pressures

• Declining consumer sentiment

• Slower job growth

• Rate volatility

• Recession odds estimated anywhere from 35% to 93%, depending on the model

Any major shock—economic or geopolitical—could trigger:

• forced sales

• rapid repricing

• distress escalations

• higher delinquencies

This is why lenders remain conservative even as pipelines reopen.

🔥 The Reality: A Slow Burn, Not a Sudden Collapse

Banks are choosing controlled workouts over liquidation.

That’s good news for borrowers.

• No fire sales

• No mass foreclosures

• No 2008-style panic

But it also means:

• distress will unwind slowly, not suddenly

• pricing discovery will take longer

• sponsors with weak balance sheets will struggle

• borrowers with expertise (or strong brokers) can negotiate better terms

🏁 THE TAKEAWAY

Banks are lending again—but they haven’t resolved the core issues created by low rates, rapid cap rate expansion, and unrealistic valuations from 2019–2022.

Until something forces their hand, expect:

• gradual workouts

• conservative underwriting

• rolling maturity stress

• opportunities emerging deal-by-deal, not market-wide

Smart borrowers should act now—before competition heats up and while lenders are still offering attractive structures to strong sponsors.

If you need guidance on refinancing, restructuring, or sourcing new capital, the Medallion Funds team is here to help.

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© 2023-2024 Bill Rapp, Medallion Funds LLC, Director of Capital Advisory