- CRE loan originations improved in 2024, with $4.4B in Q3, up from $3.9B in Q2. Multifamily originations increased by 76% YoY, reflecting pent-up demand and lower financing costs.
- Despite the rebound, overall originations remain 53% below pre-pandemic levels, with the office sector down 77% compared to the 2019 average.
- Office properties continue to lead in delinquency and charge-off rates, with delinquency hovering between 7% and 8%, compared to below 3% for other assets.
- Criticized loans in office-heavy markets like San Francisco, New York, and Washington, DC, remain a significant challenge for bank portfolios.
Bank CRE loan origination volumes are showing signs of recovery, driven by easing financing costs and demand for delayed transactions, as GlobeSt reported.
By The Numbers
Trepp’s data reveals a steady rise in 2024, with Q3 originations reaching $4.4B, marking a consistent quarterly uptick from Q1’s $3.5B.
Multifamily originations surged 76% YoY in Q3, highlighting strong demand in this asset class. Yet, when benchmarked against 2019 levels, all major CRE sectors, including multifamily (-47%), industrial (-42%), and retail (-48%), remain much lower.
Office Pain Points
The office market continues to underperform across key metrics. Delinquency rates in office loans have risen to between 7% and 8%, higher than lodging (~3%), retail (~2%), and multifamily (slightly above 1%). Meanwhile, net charge-off rates for office loans approach 3%, far outpacing other property types like lodging (1%) or industrial (sub-1%).
Criticized loans—a measure of higher-risk lending—are particularly severe in office-heavy markets. Major metro areas like San Francisco, New York, and Washington, DC, lead with the highest rates, while cities such as Chicago and Los Angeles saw criticized loan rates shoot up YoY in 2024.
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Persistent Challenges
Macroeconomic factors, including monetary policy shifts, are shaping CRE loan performance. Lower interest rates have fueled multifamily demand, while structural issues in office real estate exacerbate lending risks.
The ongoing struggles in the office market reflect broader challenges in adapting to post-pandemic workplace trends and debt pressures, with $2T in office debt maturing by 2026.
Looking Ahead
While bank CRE loan originations show positive momentum, challenges in the office sector continue to weigh heavily on overall performance.
Multifamily and industrial remain strong drivers of recovery, but addressing the systemic issues in office real estate will be critical for sustained growth in CRE lending.pportunities in alternative real estate assets could define the next wave of growth.gh-quality but still affordable properties outside Midtown.
