The U.S. commercial real estate (CRE) lending market is more active than it was during the recent downturn, but it is operating under very different conditions than in prior cycles. Banks remain an important source of financing, yet underwriting remains somewhat conservative, while private lenders and CRE debt funds are playing a larger role in both new loans and refinancings. For borrowers, owners, developers and businesses with exposure to commercial property, the takeaway is clear: Financing remains available, but it often comes from a different mix of lenders, on more structured terms, and with greater emphasis on advance planning and execution. Banks Are Lending More Selectively As banks have returned to the CRE lending market, they remain selective in evaluating and approving specific transactions. Regulatory pressures, balance‑sheet considerations (such as concentration in CRE), and recent market and geopolitical volatility have reinforced most banks’ cautious approach. Loan‑to‑value (LTV) ratios may be lower than in prior cycles, and underwriting standards and deal structures remain disciplined. While conditions are less restrictive than at the height of the downturn, they are not a return to pre‑pandemic norms. Additionally, most banks are happy to deal with long-time “preferred” clients with whom they have deeper relationships — cash management and even wealth management relationships come to mind. Banks may be more hesitant to finance a project for a new customer or a customer from whom the bank expects to generate little to no ancillary business income. In practical terms, a transaction that could have been financed through a single senior bank loan in 2021-22 may now require more borrower equity, reduced leverage or additional capital from non-bank sources. Private Lenders Fill a Growing Role As banks have remained selective, private lenders and CRE debt funds have expanded their presence across the market. This shift reflects not only short‑term opportunity, but a broader change in how CRE is being financed. Private lenders often evaluate transactions differently than regulated banks. Borrowers can expect a closer focus on asset‑level business plans, cash‑flow durability, sponsor support and exit timing. Private lenders may allow higher LTV ratios in return for increased pricing, which provides access to additional proceeds. However, loan documentation, covenants, pricing and enforcement rights may differ from traditional bank forms. In some respects, these changes may be favorable, e.g., non-recourse financing may be more readily available. On the other hand, borrowers can expect more rigorous financial and property due diligence. Non-bank lenders also tend to rely more heavily on secondary markets, which means a sponsor or borrower may no longer deal with its “lender” post-closing, but instead will be handed off to a third-party servicer. For borrowers, this means that there may be greater access to capital, but deal terms and structures can be more customized and, in some cases, more complex. Capital Structures Are Becoming More Layered More conservative bank lending has led to increased use of layered capital structures. Mezzanine debt, preferred equity and other forms of subordinate financing are often used to bridge the gap between senior loans and borrower equity. In addition, some banks are shifting toward indirect CRE exposure rather than originating property‑level loans. These trends can add flexibility, but they also increase transaction complexity. Multi‑source financings often involve intercreditor agreements, additional negotiation and more detailed documentation. These issues can affect timing at closing — not to mention result in much higher attorney fees (!), which typically are all paid by the borrower — and become especially important if a project later faces performance challenges. Refinancing Pressure Drives Market Activity A significant volume of CRE loans are approaching maturity, making refinancing a primary driver of today’s lending activity. Many of the CRE loans maturing in the next 12 to 18 months are quasi-permanent or construction loans with a three-to-five-year maturity and were underwritten during a period of historically low interest rates. A loan that may have been stress-tested during underwriting in mid-2021 at a 5.5% interest rate will be refinanced with an actual interest rate exceeding that level. In the current environment, refinancing may support lower loan proceeds than existing balances, even for performing assets. That dynamic can create equity gaps that must be addressed through additional equity, mezzanine financing or other structural solutions. For borrowers and owners, the planning message is straightforward: Refinancing should be addressed early in order to provide flexibility if capital structure adjustments are required. Activity Is Recovering, but Discipline Remains Loan originations and transaction volumes have rebounded from recent lows, and property values in several sectors appear to have stabilized after meaningful repricing. These developments support renewed lending activity by giving market participants more confidence in underwriting and execution. At the same time, increased activity does not signal a return to looser credit standards. Lenders remain focused on downside protection, conservative leverage and realistic exit assumptions. The recovery to date reflects discipline, not risk expansion. Bottom Line The CRE lending market is active, but it is functioning through a changed framework. Conservative bank underwriting, the continued growth of private credit, and substantial refinancing needs are reshaping how CRE transactions are financed in the United States. Successful execution now depends less on whether capital exists and more on lender mix, structure, timing and preparation. This publication was prepared with the assistance of generative AI tools used for research and drafting support. Any content created through generative AI was used as a starting point and has been reworked, reviewed, edited and validated by our lawyers to ensure accuracy and compliance with applicable legal standards. The use of these tools is intended to enhance efficiency and does not replace our professional judgment or legal expertise.
