CRE Lenders Are Lending Again—But Only to Sponsors with Substance
Q2 bank earnings brought a cautiously optimistic tone to CRE markets, with several national lenders citing stabilized credit conditions and improving deal flow. The result? Debt markets are moving again—but this time, with discipline.
This isn’t a return to 2021’s risk-on, capital-flush environment. Even as activity picks up, fundamentals rule. Capital may be available but it’s being rationed carefully.
Borrowers are facing:
- Lower leverage: LTVs remain in the 60–70% range, even on stabilized core assets
- Tighter terms: Greater scrutiny of lease-up risk, tenant profiles, and market saturation
- More structure: Required reserves, deeper documentation, and creeping recourse provisions
While traditional banks remain cautious, private credit and debt funds are stepping in—offering more flexible structures but demanding deeper diligence in return.
Sponsors must now show exactly where every dollar is going—and how the risk-adjusted return holds up.
There’s less tolerance for storytelling, and more need for structure.
Bridge loans are making a comeback for transitional assets, especially in multifamily, industrial, and healthcare. But lenders want visibility: robust business plans, market absorption data, and backup strategies for slower lease-ups or refinancing delays.
Underwriting is also factoring in climate risk, emissions exposure, and insurer sentiment. It’s no longer enough to show income—borrowers must show resilience.
This isn’t a loose-money cycle. Today, being bankable means being bulletproof. Sponsors need to be sharper, more transparent, and operationally tight. Lenders aren’t just asking for spreadsheets anymore—they want clarity, credibility, and control.
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