The Lending Machine Roars Back: CBRE's Q1 Numbers Tell the Story

TL;DR

CBRE's Lending Momentum Index surged 13% quarter-over-quarter and 90% year-over-year to reach 292 — the highest reading since Q1 2023. CRE investment volume climbed 14% year-over-year to $88 billion in Q1 2025. Loan spreads tightened to 183 basis points, down 29 bps from a year ago. Multifamily spreads hit 149 basis points, the lowest since Q1 2022. Banks now account for 60% of non-agency loan closings. The lending machine is back, and capital is flowing with conviction.

The Momentum Index

When I look at the capital markets, I like to start with CBRE's Lending Momentum Index because it cuts through the noise. An index reading of 292 means lending activity is nearly three times the baseline level. The 90% year-over-year increase isn't incremental improvement — it's a fundamental shift in lender behavior.

What's driving it? Several forces are converging simultaneously. Banks that spent two years on the sidelines are competing aggressively for market share, now accounting for 60% of non-agency loan closings. Life insurance companies and debt funds are active. And the agencies — Fannie Mae, Freddie Mac, and FHA with its new multifamily rules — continue to provide a reliable backstop for multifamily lending.

The 13% quarter-over-quarter acceleration tells me that momentum is building, not plateauing. Lenders aren't just returning to the market — they're increasing their exposure quarter after quarter as confidence grows and competitive pressure intensifies.

Spread Compression Signals Confidence

The spread data is where the story gets really interesting for borrowers and investors. Overall loan spreads tightened to 183 basis points, down 29 bps year-over-year. Multifamily spreads compressed to 149 basis points — the lowest level since Q1 2022.

Let me translate what spread compression means in practical terms. A 29 basis point reduction on a $50 million loan reduces annual debt service by approximately $145,000. Across a portfolio of deals, that spread compression translates into materially better returns and more projects that pencil.

But spreads don't compress in a vacuum. They compress because lenders are competing for business, because risk perceptions are improving, and because the capital markets believe that CRE fundamentals support current pricing. Spread compression is a confidence vote from the people who evaluate risk for a living.

The multifamily spread at 149 bps is particularly significant. Multifamily has always been considered the safest CRE asset class by lenders, and when multifamily spreads approach historical lows, it tells you that the institutional lending community views the housing market as fundamentally healthy.

Where the Capital Is Flowing

The $88 billion in Q1 2025 CRE investment volume — up 14% year-over-year — isn't flowing evenly across all sectors. Understanding where capital is going reveals where the market sees value.

• Multifamily continues to capture the largest share of investment volume, driven by the combination of favorable lending terms, demographic tailwinds, and housing supply shortages.
• Industrial remains active despite tariff headwinds, particularly in inland logistics hubs benefiting from reshoring activity.
• Student and senior housing are attracting increasing institutional attention as investors seek recession-resilient cash flows anchored by demographic demand.
• Office investment is recovering from extreme lows but remains selective, focused on Class A assets in top markets and conversion opportunities.

The capital flow pattern confirms what we've been articulating at F6 Partners: the market is rewarding specificity and punishing generality. Investors deploying capital into well-defined niches with strong demand drivers are outperforming those taking broad, unfocused positions.

Putting This to Work

So what does all of this mean for you as an investor or developer? The lending environment is the most favorable it's been in nearly three years, and the window may not stay open indefinitely.

Here's how I'm thinking about it at F6 Partners:

• Acquisition financing is available and attractively priced. If you've been evaluating deals but hesitating on the capital stack, the spread compression has materially improved the math. Projects that didn't pencil six months ago may work now.
• Refinancing opportunities are real. If you have properties with near-term maturities, the current lending environment offers a chance to recapitalize at favorable terms. Waiting for rates to drop further is a gamble — the spread improvement alone makes today's terms compelling.
• Capital relationships matter more than ever. With banks competing for business, the quality of your sponsor story, your track record, and your lender relationships directly impact the terms you receive. This is where experienced operators separate themselves from the pack.

I tell my investors that markets reward preparation and punish hesitation. The lending machine is roaring back, and the numbers — 292 on the momentum index, 183 bps on spreads, $88 billion in volume — speak louder than any commentary. The question isn't whether the market is ready. It's whether you are.