- CRE debt origination dropped only 4.5% in 1H24, suggesting a possible bottom after steeper drops in prior years.
- Industrial originations surged, while office, retail, and multifamily originations saw steep declines.
- Banks continue cutting their exposure to CRE debt, while securitized, insurance, and debt fund lending grew in popularity.
According to Newmark’s Q2 Capital Markets report, CRE debt origination may have hit its lowest point, with a YoY decline of only 4.5% in the first half of 2024.
This comes after significant declines in 2022 and 2023, as reported in Globest.
While a drop in refinancings affected overall volume, sale financing and optimism about future rate cuts helped mitigate the impact.
Sector Performance
Industrial originations saw 28% quarterly growth and were up 67% compared to the 2017–2019 average, reflecting strong demand.
In contrast, office originations plummeted 62%, retail was down 32%, and multifamily fell 28%.
The number of active lenders also fell, especially for office and multifamily, indicating ongoing lender caution in these sectors.
Investment Trends
Investment sales dropped by 10% in 1H24, with office sales slowing after a strong Q1.
Meanwhile, multifamily deals—particularly portfolio acquisitions—helped offset the decline, as institutional investors returned to the market.
However, rising cap rates are creating new challenges, making deals less attractive relative to the cost of debt capital.
Market Outlook
Banks remain the primary source of CRE financing, though their market share declined in Q2, as securitized and insurance-based lending increased.
Newmark predicts banks will continue reducing CRE exposure, presenting a potential supply shock to the market.
With $632B in potentially troubled debt maturing between 2024 and 2026, the next few years will be critical for CRE financing.
