Even as commercial real estate (CRE) values face a sharp decline, lenders across the U.S. remain surprisingly eager to issue loans. Recent data shows values have dropped between 13% and 21% since mid-2022, marking one of the steepest downturns since the early 1990s and the Great Recession. Yet, instead of pulling back entirely, banks and private lenders are continuing to finance deals—though with much more conservative terms.
This resilience in lending is reshaping how investors and developers approach financing. With lower property values, new opportunities are emerging for those who can secure funding, while cautious underwriting is ensuring lenders remain protected in a volatile market.
Why Lenders Haven’t Stepped Away
1. Conservative Loan Standards
Banks are lowering loan-to-value (LTV) ratios to around 60%, giving themselves a cushion against further declines. This shift means borrowers may need more equity up front but also signals lenders’ willingness to keep capital flowing.
2. Community Banks Step In
Community and regional banks are proving vital to local projects. Unlike national institutions, these lenders often provide tailored terms and show more flexibility—particularly for multifamily housing and small-scale developments.
3. Private Credit Gains Ground
Private lenders and debt funds are filling gaps where traditional banks hesitate. Offering higher LTV ratios (sometimes up to 75%), these players are expanding their market share, though experts warn of long-term risks tied to lighter regulation.
The Silver Lining: A Market Ready to Rebound
Despite declines, analysts see signs of recovery ahead. Forecasts suggest CRE capital values could grow by nearly 4% annually over the next two quarters, fueled by stabilizing interest rates and steady demand in sectors like multifamily and industrial.
For investors, this moment represents both risk and opportunity. Securing loans may be more challenging, but those who succeed can acquire properties at discounted values, positioning themselves for future gains once the market rebounds.
What This Means for Investors
More Equity Required – Buyers must be prepared to bring stronger capital contributions.
Flexible Financing Options – Community banks and private lenders may offer alternatives to traditional bank loans.
Strategic Timing – With values down, now may be an opportune time to expand portfolios before the market stabilizes.
