US commercial real estate credit markets showed robust recovery in 2025, with fundraising reaching $222.2bn, a 29% year-over-year increase according to this month’s report from Altus Group.
This surge reflects aggressive capital deployment by lenders, including banks and non-banks, into sectors like multifamily and industrial properties, driven by expectations of Federal Reserve rate cuts and improving transaction volumes projected at 16% growth in 2026.
There was also a strong emphasis on data centres (37% of capital) showing the continuing impact of the AI revolution.
However, critics worry that loosened underwriting standards pose significant risks, as lenders prioritised volume over prudence, echoing pre-2008 vulnerabilities. Borrowers benefitted from easier terms like higher loan-to-value ratios and extended maturities, but arguably this inflated asset valuations and masks underlying weaknesses, particularly in offices.
Some are warning of a ‘race to the bottom’, of a potential bubble, with credit spreads tightening despite persistent inflation (core PCE at 3.0% YoY) and consumer sentiment near recent lows at 56.6 according to the latest Michigan Consumer Sentiment index for February.
Lenders are increasingly ending the ‘extend and pretend’ strategy on office loans, where maturities were previously rolled over to avoid defaults.
This shift coincides with commercial mortgage-backed securities delinquencies hitting a record 12.34%, up sharply from prior quarters, concentrated in urban office portfolios battered by remote work trends. Over $1.5tn in commercial real estate debt is coming due in 2026, forcing workouts, foreclosures or discounted sales.
Regional banks, holding 40% of commercial real estate exposure, report rising provisions, while opportunistic funds eye distressed assets.
Meanwhile, a credit boom continues. It offers liquidity but underscores a bifurcated market: resilient industrial and medical assets thrive, while offices lag in a K-shaped recovery. Investors should monitor delinquency trajectories and regulatory scrutiny for signs of broader contagion.
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