Multifamily Lending Leads Bank Growth in 2025

US Banks Rebound in CRE Lending

CoStar reports that US banks nearly doubled their commercial real estate lending growth in 2025 compared to 2024, marking a return to market engagement and relief for property owners and developers. Total loan balances reached $2.93T, with multifamily lending driving much of the increase even as signs of sector stress persist.

Multifamily Lending Outpaces Other Sectors

Multifamily lending grew 4.9%, adding $31B to portfolios, while nonresidential loans increased 3.5%. The multifamily sector now accounts for the largest share of commercial real estate loans at banks, totaling $661.9B and making up 22.6% of their overall holdings.

Stress Persists Despite Growth

Delinquency and nonaccrual rates stabilized after the sharp surge seen in 2024. However, multifamily nonaccruals still climbed 17.1% to $6.57B. Foreclosed multifamily properties also jumped 64%, signaling continued stress in the sector.

Meanwhile, industry analysts highlight a wide gap between nonaccrual loans and actual foreclosures. Nonaccrual balances reached $34B, while foreclosures totaled just $3B. This difference suggests banks prefer loan extensions and modifications instead of seizing distressed properties, a pattern that has also appeared across parts of the commercial mortgage-backed securities market where improving deal performance is masking underlying property-level distress.

Looking Ahead to 2026

Banks expanded unfunded commercial real estate commitments by 6.7%, a $32.6B rise to $516B. This indicates a pipeline for future loan growth, especially in the multifamily lending segment, despite ongoing sector challenges and a cautious approach to distressed assets.