Banks Boost Apartment Lending Even as Troubled Loans Increase

CRE loan growth nearly doubled in 2025, but rising nonaccruals tell a deeper story.

Nina Dale
March 04, 2026

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Good morning. Banks are stepping back into CRE lending, growing portfolios at nearly twice last year’s pace. Multifamily is leading the way, even as signs of stress continue to bubble under the surface.

Today’s issue is sponsored by Lev—ditch legacy CRE workflows for an AI-powered platform built for the full deal lifecycle.

🎙️This Week on No Cap: From multifamily to car washes, Chris Salerno shares where the returns are shifting.

CRE Trivia 🧠

Which downtown building just sold for $1, with plans to convert it into artist space?

(Answer at the bottom of the newsletter)

Market Snapshot

S&P 500

GSPC

6,816.63

Pct Chg:
-0.94%

FTSE NAREIT

FNER

827.41

Pct Chg:
-0.61%

10Y Treasury

TNX

4.063%

Pct Chg:
+0.006

SOFR

30-DAY AVERAGE

3.67%

Pct Chg:
-0.00

*Data as of 3/3/2026 market close.

Lending Rebound

Banks Boost Apartment Lending Even as Troubled Loans Increase

CRE lending rebounded in 2025, yet signs of strain haven’t fully cleared.

By the numbers: U.S. banks expanded CRE loan portfolios 2.3% in 2025 to $2.93T— nearly double 2024’s growth but well below 2022’s 10.7% surge, per FDIC data. Delinquency pressures eased sharply, with troubled balances rising just 4.4% after a 35.8% spike the prior year, as the overall rate edged up slightly to 1.55%, signaling relative stability.

Capital markets thaw: Loan originations jumped 73% in Q4 as banks reengaged amid steadier rates and clearer pricing. While delinquencies and legacy loan sales persist, deep capital pools are absorbing stress, with lending up across most investor groups despite uneven property-level performance.

Multifamily leads the rebound: Multifamily loans rose $31B, or 4.9%, to $661.9B — 22.6% of total CRE holdings — while owner-occupied and nonfarm nonresidential lending grew 3.5% ($64.5B). In contrast, construction and land development loans fell 7.5% ($29.4B) as higher-for-longer rates dampened new projects.

Stress pockets persist: Even as multifamily lending expanded, stress mounted. Nonaccrual loans jumped 17.1% to $6.57B and multifamily foreclosures surged 64%. Across CRE, banks hold $34B in nonaccrual loans but just $3B in foreclosures, underscoring widespread loan extensions and restructurings to delay losses.

➥ THE TAKEAWAY

Pipeline points to growth: With unfunded CRE commitments up 6.7% to $516B, banks are signaling more lending ahead in 2026. The worst-case distress scenario appears off the table — for now — but elevated nonaccruals and widespread loan extensions suggest the real test of durability is still to come.

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✍️ Editor’s Picks

Multifamily is all we do: Strategic Insurance Group delivers expert-built coverage and lower premiums. Submit your property details and get an instant online quote today. (sponsored)
Redemption reversal: Blackstone’s BREIT raised $1B more than it faced in redemptions, marking its first net inflow month after three years of outflows.
Capital return: Family offices are increasing CRE equity allocations in 2026, targeting direct deals and value-add strategies amid pricing resets.
Get real leads in seconds: Don’t waste time fishing for LLC information; get real leads with DealGround’s Automated Ownership Research. Free Trial users get 10 free credits. (sponsored)
K-shaped risk: ULI warns a widening K-shaped economy is bifurcating property performance, amplifying risks for lower-tier assets as capital concentrates in top markets.
Studio stakes: Paramount’s merger with Warner Bros. Discovery includes valuable studio lots and office properties, positioning the combined company to monetize core LA real estate.

🏘️ MULTIFAMILY

Confidence climb: Investor sentiment toward multifamily rebounded as rent growth stabilizes and supply peaks, signaling improving conditions later this year.
Atlanta squeeze: Despite improving fundamentals, Atlanta apartment owners face distress as high-rate debt and record deliveries weigh on cash flow.
Risk repricing: Landlords are pushing more operating expenses onto tenants, increasing hidden lease risks and underwriting complexity for occupiers.
Management scale: ProperXPM acquired Novo Properties from Alexander Properties Group, expanding its third-party management footprint across multifamily assets in multiple Southeast markets.

🏭 Industrial

Storage inflection: Self-storage REITs are nearing an earnings inflection as new supply moderates, but demand normalization clouds timing.
Data alliance: Public Storage and Welltower formed a data science partnership to deploy AI across operations and investment decisions.
Logistics anchor: RJW Logistics signed a 790K SF industrial lease in Chicago, triggering the next phase of Trammell Crow’s development.
Hub dominance: The Southeast continues capturing outsized big-box industrial demand, reinforcing its role as a national logistics hub.
Warehouse pivot: Developers are converting vacant warehouses into ICE detention centers, creating a niche adaptive reuse pipeline tied to federal contracts.

🏬 RETAIL

Anchor arrival: Costco signed a long-term ground lease with MCB in Maryland, anchoring a major mixed-use redevelopment.
Northwest push: Raising Cane’s entered the Pacific Northwest, advancing its national expansion with new restaurant openings.
Groundbreaking set: NewMark Merrill’s JV will develop the 297,363 SF Desert Sky Plaza II in Victorville, 70% pre-leased and targeting fall 2027 delivery.

🏢 OFFICE

AI conversions: AI demand is driving office-to-data-center conversions from Chicago to Berlin, reshaping downtown real estate economics.
Trophy pricing: SL Green is seeking $360M for 1350 Sixth Avenue, testing demand for Midtown Manhattan office assets.
Digital rights: BXP sold digital property rights tied to a development, marking a first-of-its-kind transaction monetizing virtual real estate value.
Exit penalty: Target paid $110M to terminate downtown Minneapolis office leases, underscoring corporate retrenchment from legacy space.
Midtown expansion: Snowflake signed a major lease at 7 Times Square with BXP, expanding its Manhattan office footprint.

🏨 HOSPITALITY

Selective growth: Starwood Hotels outlined selective expansion plans for its 1 Hotels, Treehouse and Baccarat brands, prioritizing disciplined global growth.
Financing secured: Stephen Ross secured a $173M acquisition loan for a luxury West Palm Beach hotel, backing a high-end hospitality bet.

A MESSAGE FROM HENRY

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📈 CHART OF THE DAY

Industrial cap rates have leveled off around 6% after resetting higher, with stabilizing fundamentals pointing to steady pricing ahead.

CRE Trivia (Answer)🧠

The Lumber Exchange Building in downtown Minneapolis sold for $1 to a local firm planning to convert the historic 12-story property into space for artists and creative businesses.