The Federal Reserve released the January 2026 Senior Loan Officer Opinion Survey (SLOOS) earlier this week. It had notable implications for the commercial real estate (CRE) market, as it showed that lending standards are loosening for the first time since 2022 and that loan demand continues to rise. These trends are expected to continue in 2026, given an improving outlook for credit quality, especially among large banks. CRE debt tailwinds may be underappreciated, suggesting continued price acceleration in the year ahead.
The survey showed that lending standards loosened for the first time since 2Q22 (15 quarters), while loan demand improved for the second quarter in a row (after declining since 1Q22). Meanwhile, lending standards for corporate (C&I) loans continue to tighten, suggesting banks may be shifting their focus back to CRE.
The current CRE lending backdrop may be 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.
The January SLOOS included special questions asking banks about their expectations for lending standards, borrower demand, and loan performance in 2026.
The survey also asked banks about the factors behind their expectations for easing lending standards in 2026. Although these questions covered all major loan categories (C&I, commercial real estate, residential real estate, and consumer loans) rather than CRE specifically, the responses still offer useful insight into banks’ CRE outlook, given the recent loosening of standards. Banks most frequently cited improving credit quality in existing portfolios, a more favorable economic outlook, and increased competition as the leading reasons they expect lending standards to ease.
The latest SLOOS results suggest that CRE credit dynamics are shifting meaningfully in favor of borrowers. After a prolonged period of tightening, banks are beginning to ease standards, loan demand is strengthening, and forward-looking expectations for 2026 are increasingly optimistic. If these trends hold, they could create durable tailwinds for CRE valuations, supporting continued price growth as the year unfolds.
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.
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