Commercial Real Estate Lending Standards Stable Amid Volatility

2025-05-14 02:40:00 ET

Summary

• Commercial real estate (CRE) lending standards were largely unchanged, even as banks tightened standards for corporate and consumer loans.
• A greater percentage of large banks reported that they were originating loans at the same or at tighter spreads (90%), higher Loan-to-Values (85%), and lower Debt Service Coverage Ratio (85%) compared to last year.
• In our opinion, CRE total returns can “muddle along” in 2025 as income returns mitigate potential headwinds to capital returns, but history shows that 7% to 8% annual returns over the longer term are reasonable.

By Rich Hill, Global Head of Real Estate Research & Strategy

The Federal Reserve recently published the Senior Loan Officer Opinion Survey on Bank Lending Practices for 1Q 2025. The survey captures responses collected between March 31st to April 11th, a period of pronounced market volatility given the announcement of Tariffs....

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