Lending for commercial real estate climbed sharply in the third quarter, returning to levels last seen in 2018. That rise has been driven by stronger origination activity, particularly in September, as financing options became more flexible and certain constraints began to ease.
One key driver has been the resurgence of permanent loans, which rose significantly year-on-year. The average spread for commercial mortgages widened slightly, but multifamily lending costs bucked the trend and moved lower, suggesting strong appetite for exposure to this asset class.
Lenders have shown more willingness to structure deals around floating rates, supported by stability in Treasury yields. At the same time, narrower credit spreads helped close valuation gaps, which had previously made many transactions unworkable.
A broader range of lenders have returned to the market. Debt funds and mortgage REITs expanded their share of non-agency lending, with strong year-on-year growth in volume. Banks were particularly active, sharply increasing their origination share compared to the previous year. CMBS issuance also expanded its role, regaining ground after a muted period, while insurance companies pulled back, reducing their exposure across the board.
Real Estate Credit Investments Limited (LON:RECI) is a closed-end investment company that specialises in European real estate credit markets. Their primary objective is to provide attractive and stable returns to their shareholders, mainly in the form of quarterly dividends, by exposing them to a diversified portfolio of real estate credit investments.
