- Nonbank lenders have been active in early 2025, with $4.43B in YTD loan offerings, exceeding total activity for 1Q24.
- LoanCore Capital is a leading player, preparing a $1.15B loan offering backed by a mix of multifamily, industrial, and retail assets.
- Easier borrowing rates and underwriting spurred demand for floating-rate loans, especially for property repositioning and lease-up strategies.
- Despite tightening from traditional banks, nonbank lenders are driving deal volumes, with the market expected to enter a recovery phase in 2025.
As reported by CoStar, nonbank lenders showed a strong uptick in short-term property financing in the opening weeks of 2025, signaling a promising year ahead for the CRE sector.
In fact, with $4.43B raised in bridge loan offerings, 2025 YTD lending has already surpassed 1Q24 CRE lending activity.
Rise of Alternative Lenders
As major banks continue to deal with write-offs from bad loans, nonbank lenders are stepping up their activity, particularly in the short-term, floating-rate loan space.
The YTD surge, fueled by offerings from firms like LoanCore Capital, FS Credit Real Estate Income Trust, and ACRE Capital, points to a dynamic shift. These loans are generally aimed at transitional properties or those needing tenant lease-up and offer more flexible terms than traditional bank loans.
These loans, which comprise a significant portion of the $4.43B raised this month, are especially attractive as borrowing rates tied to the Secured Overnight Financing Rate (SOFR) have started falling, easing the financial burden for borrowers.
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Key Nonbank Lenders
One of the largest offerings this year comes from LoanCore Capital, which is preparing to bring its LNCR 2025-CRE8 bond to market. This loan portfolio, valued at $1.15B, is backed by multifamily, industrial, and hotel properties, with the largest concentration in multifamily (46.2%).
A $94.36M bond secured by Uptown Worthington, a mixed-use property in Malvern, PA, featured both a 253-unit apartment complex and a grocery-anchored retail center.
These loans reflect a broader trend in nonbank lending, with multifamily and industrial properties continuing to dominate investor interest. Retail and hotel assets also see rising demand, thanks partly to repositioning opportunities.
Nonbank Lending
The surge in short-term financing is helping fuel deal flow across CRE. Transaction volumes in 1Q24 were up 43% from the same period in 2023, driven partly by the rise in nonbank lending.
As banks remain more conservative in their lending practices due to regulatory pressures, nonbank lenders are stepping into the void, providing capital for deals, refinancing, and property repositioning.
Moody’s and Fitch Ratings both predict a busy year ahead for floating-rate, bridge lending, with nonbank lenders expected to continue playing a key role in transaction volume growth. LoanCore Capital, for instance, plans to boost its floating-rate origination volume to $3B in 2025.
Market Outlook
Despite challenges from rising costs and uncertainty in the broader economy, nonbank lenders are optimistic about 2025.
Commercial real estate fundamentals are strengthening, and there’s an increasing demand for flexible, short-term financing solutions, particularly for transitional assets and properties needing repositioning.
With interest rates stabilizing and growing investor confidence, many believe the market is poised for recovery.
