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Watch for CMBS lending volume to vastly improve next year and pick up even more in 2026. Borrowers will like this option as the majority of conduit deals are sized off of an interest-only debt service, which allows CMBS to offer higher proceeds. Also, most banks now demand a deposit relationship of a minimum of 10% of the loan amount, which CMBS lenders do not require. Also, CMBS lenders do not charge origination fees compared to most banks, which charge anywhere from 0.50% to 1%. Most conduit CMBS loans are interest only for some part of the term allowing additional cash flow after debt service, which is very attractive to borrowers. More

Anticipate strong demand from lenders for industrial product. Watch for them to become more creative with structure in order to compete. With a lot of industrial having been built over the past few years, lenders will focus on markets with strong occupancies and reasonable rents. Although, any property that has strong market fundamentals should receive more favorable terms on both bridge and permanent financing. More

Watch for life companies to have a huge lending appetite next year, leading to plenty of available capital. Most LCs plan to beat their 2024 allocations in 2025. Rates are expected to drop again, which will encourage borrowers to proceed with refinancing or acquisitions. This surge in transactional volume should increase life company originations. Borrowers will see higher leverage and lower debt yield minimums. Anticipate LCs to be more detailed in their underwriting and look closer at rent trends, co-tenancy and retention ratios. More

The outlook for office lending in 2025 is positive with meaningful improvements and increased liquidity. The market is starting to see some favorable trends in certain pockets relative to utilization, rents and vacancy. Watch for a flight to quality as lenders favor Class A office buildings. CMBS lenders will be active for well-performing office assets in strong markets. Banks will likely remain sidelined for the remainder of 2024 but will slowly and selectively re-enter the space in 2025 with building sales and loan sales starting to remove office loans from their balance sheets. More