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CRE loan demand turns positive for the first time since 2022

Market response: Real estate

November 4, 2025 | 2 min read
Rich Hill
Global Head of Real Estate Research & Strategy
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The Federal Reserve’s 3Q25 Senior Loan Officer Opinion Survey showed unchanged lending standards and the first increase in CRE loan demand since 1Q22. This marks a notable shift in the CRE market after several years of tightening standards and declining loan demand. Looking ahead, the lending backdrop may be more reminiscent of the post-GFC recovery in late 2010–2011 when standards loosened and demand rose. Indeed, given the close directional relationship between lending standards and year-over-year changes in unlevered CRE valuations, the survey suggests potential for accelerating price increases ahead. Conducted between September 22 and October 3, the survey likely captures the recent credit challenges in bank portfolios.

Lending standards:

The percentage of lenders reporting tighter standards showed improvement across the board. The average net share of banks tightening standards was essentially unchanged at 3.8%. (Note, a reading of 0% implies standards neither loosened nor tightened). By comparison, last quarter nearly 10% of respondents said they were tightening standards.

  • Construction & Land Development: 6.6% of respondents net tightened standards, down from 9.7% in 2Q25.
  • Core Commercial: 3.3% net tightened, down from 11.5% last quarter.
  • Multifamily: 1.6% net-tightened, down from 4.8%.

Loan demand:

Loan demand turned positive for the first time since early 2022, with the average net share reporting stronger demand at +1.7% vs -8.7% in 2Q25. The rebound in core commercial demand stands out and is worth monitoring.

  • Construction & Land Development: -4.9%, improving from -11.3%.
  • Core Commercial: +10%, up from -11.5%.
  • Multifamily: 0%, up from -3.2%.

Bottom line:

With lending standards stabilizing and loan demand turning positive for the first time in over three years, banks appear to be signaling renewed confidence in the sector. This aligns with a +17% increase in transaction volumes in 3Q25 and +17% year-to-date growth versus the same period in 2024. Additionally, the CRE Finance Council Sentiment Index, a reliable leading indicator, has continued its climb, reaching nearly 123 in 2Q25, close to its prior peak. Together, these dynamics suggest the groundwork is being laid for a more durable CRE recovery heading into year-end.
Real estate
Disclosure

Investing involves risk, including possible loss of Principal. Past Performance does not guarantee future return. Potential investors should be aware of the risks inherent to owning and investing in real estate, including value fluctuations, capital market pricing volatility, liquidity risks, leverage, credit risk, occupancy risk and legal risk. All these risks can lead to a decline in the value of the real estate, a decline in the income produced by the real estate and declines in the value or total loss in value of securities derived from investments in real estate. Commercial real estate (CRE) investments carry several inherent risks, including those related to the economy, interest rates, and tenant behavior. These risks can impact property values, rental income, and overall investment returns. International investing involves greater risks such as currency fluctuations, political/social instability, and differing accounting standards.   

Views and opinions expressed are accurate as of the date of this communication and are subject to change without notice. This material may contain ‘forward-looking’ information that is not purely historical in nature and may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.

The information in the article should not be construed as investment advice or a recommendation for the purchase or sale of any security. The general information it contains does not take account of any investor’s investment objectives, particular needs, or financial situation.

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