Latest Finance Trends

Hotel lending will pick up this year, especially as life companies, CMBS lenders, regional and big banks return to the space. Also, watch for the debt funds, bridge and private money lenders to continue swooping up market share. The result is more options and a competitive environment for borrowers. There will be an increase in leverage and more available subordinated debt. Terms will come down to the location, borrower and asset. There will be a push toward branded hotels with strong sponsors. Although, keep an eye out for more willingness to lend on riskier deals such as ground-up construction and heavy repositioning, as well as an increase in capital for independent hotels and resorts. More

Keep an eye out for more life company lending this year, as many lenders plan to surpass last year’s total origination numbers. Life companies will try to capture more business by expanding their boxes. Watch for them to be more flexible in the type of retail properties they will consider, moving away from the traditional grocery-anchored centers. There will be a push toward more construction-to-perm and bridge loans as a way to grab yield. Anticipate life companies starting to compete on pricing and increasing leverage. Also, count on more flexible prepayment options. Look for sensitivity around higher insurance costs. The focus will be on strong experienced sponsors. More

Multifamily construction capital will increase as investors become more realistic with long-term rates and lenders are recycling capital as loans mature. Regional and local banks have started to re-enter the space, which should continue as rates decrease. Although financing will be available, lenders will be more selective and there will be a higher cost of capital. Anticipate a flight to quality for strong projects and experienced sponsors. The biggest hurdle is not being able to make the numbers work in today’s market. Caution around overbuilding and concerns about rents will continue to keep some lenders at bay. More

There is a positive outlook for office lending this year with meaningful market improvements and increased liquidity. CMBS lenders are back and targeting office assets that are performing well in strong markets. Banks will slowly and selectively re-enter the space in 2025 with building sales, refinancings and loan sales removing office loans from their balance sheets. Life companies will have some appetite for newer quality office product at a lower leverage. There will be a flight-to-quality trend that should persist for well-occupied properties. More

Borrowers will see an increase of capital in the single-family rental (SFR) and build-to-rent (BTR) space this year. Construction financing will be available for strong BTR projects backed by top-tier sponsors. Lenders feel this is a solid asset class and rents are expected to grow in most markets. This is also a highly attractive housing solution for many tenants versus traditional multifamily communities. Look for more demand for refinances as many sponsors decide to hold properties as rates go higher and asset values are down. More

Count on plenty of available bridge capital throughout the year, given market uncertainty. Bridge lenders are increasing their allocations for 2025, which will lead to more competition and looser underwriting standards. Many out-of-the-box deals, assets coming out of construction or loans needing higher leverage will have to seek bridge financing. With the gap narrowing between SOFR-based and Treasury-based lending, keep an eye out for more “bridge light” lenders to take on more risk than they usually would. Expect life companies to be more active in bridge lending this year, as well as some CMBS lenders entering the game. More

JV and pref equity investing should slowly begin to pick up this year as investors need to start moving dry powder. Since the initial rate hikes in March 2022, common equity investments from institutional groups abruptly halted, accumulating a stockpile of dry powder. Many equity investors waited for distressed opportunities and paused their JV platform to start issuing pref equity to achieve high rates of return with debt-like structures. Distressed opportunities have been fewer than the market expected, and those groups will need to deploy to non-distressed product. More

Keep an eye out for bank originations to increase in 2025 as more banks come back into the market. Strong underwriting and quality deals will be key factors in getting loans done. Even with this pick up, banks will remain selective due to elevated interest rates, regulatory scrutiny and economic uncertainty. Large money-center banks are active and offer attractive rates but with high credit/underwriting criteria, while regional and community banks are slowly re-entering the game. Some community and regional banks have delinquent loans on their books that they have been extending and pretending for more than 12 to 18 months and rates are not low enough to heal these loans just yet. More

Watch for modest increases in senior housing lending this year. Occupancy is stabilizing and inflation and labor pressures have softened in the space. Private pay Class A assets will continue to lease-up and post strong rent increases as incoming supply screeches to a halt. Development capital will still be difficult to find because of interest rates and construction prices. The agencies will continue to be the primary source of permanent financing for senior housing. Also, keep an eye out for a small number of life companies, banks, private money lenders and debt funds that will fund senior housing deals. More

Construction lending will increase due to the continued absorption of supply, and the number of construction lenders could double in 2025. Watch for more big banks to re-enter the market, although their terms will vary. The all-in rate for bank construction is lower than debt funds and private money lenders; however, with limited dry powder, the banks are reserving capital for their best development customers. Private lenders, debt funds and select regional banks will likely remain the most active, as they often have more flexibility in structuring deals. More

We asked some leaders in the industry to tell us what they foresee for the commercial real estate market in 2025. Here they give some insights on predictions for subordinate debt, the hotel market, the multifamily market, C-PACE lending and real estate investing in 2025. More