Office, Retail, and Hotel Originations Surge as Commercial Lending Momentum Builds

The commercial and multifamily mortgage market continued to gain traction in the third quarter of 2025, fueled by strong demand across the office, retail, and hospitality sectors, according to the latest Mortgage Bankers Association (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.

Total originations rose 18% from Q2 2025 and were up a robust 36% year-over-year, marking the fifth consecutive quarter of growth for the sector. The data underscores a steady recovery in property values, investor confidence, and refinancing activity after a challenging few years of market volatility and elevated borrowing costs.

“Commercial and multifamily borrowing has now increased for five straight quarters on both a quarterly and annual basis,” said Reggie Booker, MBA’s Associate Vice President of Commercial/Multifamily Research. “Lending activity increased last quarter across most major property types and capital sources, led by particularly strong growth in office, retail, and hotel properties. While sectors like health care and industrial showed slower momentum, overall volumes reflected renewed optimism as property valuations stabilized and loans nearing maturity were successfully refinanced.”

Lending Activity Expands Across Core Sectors

The MBA report revealed that loan origination volume surged across most major commercial property types, reflecting a broader market recovery and a renewed willingness among lenders and investors to deploy capital.

Year-over-year performance highlights include:

• Office properties: Up 181% YoY, the strongest rebound among all categories, signaling increased refinancing and repositioning activity as the sector continues to stabilize post-pandemic.
• Retail properties: Jumped 100% YoY, driven by stronger foot traffic, rising consumer spending, and adaptive reuse of former big-box spaces.
• Hotel properties: Rose 66% YoY, as leisure and business travel rebounded amid economic resilience and improving occupancy rates.
• Multifamily properties: Increased 27% YoY, maintaining consistent demand despite affordability headwinds and rising construction costs.
• Industrial properties: Posted a modest 5% YoY gain, cooling slightly after several years of record expansion.
• Healthcare properties: Declined 43% YoY, reflecting slower transaction activity as rising operational costs and reimbursement uncertainty weighed on investor sentiment.

Strong Q3 Momentum Compared to Q2

Quarter-over-quarter trends further illustrate the sector’s rebound. Between the second and third quarters of 2025, originations rose significantly across most property categories:

• Retail: +141%
• Hotel: +76%
• Office: +67%
• Multifamily: +12%

Meanwhile, originations for industrial and healthcare properties slipped 17% and 6%, respectively, as investors took a more cautious stance toward asset classes that had already experienced several years of aggressive growth.

Investor Appetite Returns as Capital Sources Diversify

The MBA survey also noted a notable shift in funding sources, suggesting that investors are re-entering the commercial lending space with renewed enthusiasm.

Investor-driven lenders led the way with an 83% year-over-year increase in loan volume, reflecting growing demand for higher yields in private credit markets.

Other highlights include:

• Depository lenders: +52% YoY, benefiting from improved liquidity and stable balance sheets.
• Government-Sponsored Enterprises (GSEs) — such as Fannie Mae and Freddie Mac — saw lending volumes climb 40% YoY, underscoring their ongoing support for multifamily housing and workforce developments.
• Commercial Mortgage-Backed Securities (CMBS): Up 5% YoY, as securitization markets showed signs of normalization.
• Life insurance companies: Down 4% YoY, as many insurers adopted a more defensive investment stance amid interest rate uncertainty.

Comparing the second and third quarters of 2025, lending activity also increased sharply across several capital sources:

• GSE loans: +37%
• Depository loans: +36%
• CMBS originations: +31%
• Investor-driven loans: +14%
• Life companies: -22%, reflecting more selective underwriting.

Why the Rebound Matters

The uptick in originations reflects improving confidence across the commercial real estate landscape. With borrowing costs stabilizing after the Federal Reserve’s recent rate cuts and property valuations finding a floor, both lenders and borrowers are showing greater willingness to transact.

The rebound in office and retail lending is particularly noteworthy, as these sectors were among the hardest hit during the pandemic years. Renewed activity suggests that investors see long-term potential in repositioning and adaptive reuse projects, especially in urban cores where flexible work patterns and e-commerce have reshaped demand.

The hospitality industry’s resurgence has also contributed to overall lending growth, as hotels continue to recover from pandemic-era lows and benefit from strong leisure travel and international tourism.

“This is a pivotal moment for commercial real estate lending,” said Booker. “We’re seeing capital flow back into asset classes that had been written off just a few years ago. While economic uncertainty remains, lenders appear more confident in the fundamentals driving property performance.”

Outlook for 2026

Industry analysts anticipate continued, though measured growth, in commercial mortgage lending heading into 2026. As property fundamentals improve and refinancing needs remain elevated, originations are likely to stay strong, particularly in the multifamily and retail segments.

However, persistent challenges such as labor costs, insurance premiums, and regional bank liquidity could temper momentum. Many lenders are expected to remain disciplined in underwriting standards while exploring innovative financing structures, including bridge loans, preferred equity, and hybrid debt models.

If the current trend continues, 2026 could mark one of the strongest years for commercial and multifamily mortgage activity since before the pandemic.

“We’re cautiously optimistic,” Booker concluded. “The fundamentals are improving, investor confidence is returning, and the industry is adapting to a new interest rate environment. That’s a recipe for steady, sustainable growth.” For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.