CRE CLO Pools Deepen in 2025 With Billions in Fresh Dollars

A lot of market uncertainty remains as we round out the first quarter of 2025, but one bright spot amid the murkiness has been the continuous stream of capital markets deal flow. 

An alert from the CRE Finance Council (CREFC) on March 18 highlighted five deals totaling $3.8 billion that priced the week of March 10 alone: one commercial real estate collateralized loan obligation (CRE CLO), two conduit commercial mortgage-backed securities (CMBS) transactions, and two single-asset, single-borrower CMBS deals. 

CREFC noted that the transactions brought total CMBS and CRE CLO issuance in 2025 up to $40.1 billion — an uptick of 114 percent in activity versus mid-March 2024’s measly $18.7 billion year-to-date. 

So, what’s the big splash about this year? CRE CLOs, which have suffered plenty of belly flops in the past five years, are attracting a diverse set of investors today, sources said. Couple that appetite with the cautious optimism around market and interest rate stability (along with some deep-sighed resignation that “higher for longer” is here and going nowhere fast) and you’ve got a focus on new issuance as opposed to stabilizing existing deals. 

After all, CRE CLOs are typically floating-rate notes issued on pools of transitional properties, and therefore highly susceptible to interest rate fluctuations. Last week, the Federal Reserve held interest rates steady for a second straight meeting and threw the CRE CLO and broader commercial real estate industry a — “We’re not lowering ’em!” consolation — bone. 

And, after five years of dizzying, roller coaster-esque market conditions, the glimmer of hope around those conditions continuing to improve for most asset classes may be rallying the offense.  

Plus, as long-term interest rates stabilize somewhat, market activity around new acquisitions and refinances continues to increase, necessitating the need for more leverage. Enter the CMBS and CLO markets.

This wasn’t surprising. The rebound in CRE CLOs was expected in 2025 forecasts. According to Morningstar Credit, January’s issuance weighed in at $5.4 billion — which was more than half of 2024’s total issuance for the entire year of $8.7 billion (across 11 public transactions, an increase of more than 32 percent from 2023, according to Morningstar). As of March 14, some $7.4 billion in CRE CLOs had been issued — a whopping 374 percent increase compared with the same period last year. 

As such, the CRE CLO space has seen a slew of headline-worthy activity, including TRTX 2025-FL6, a $1.1 billion CRE CLO sponsored by TPG Real Estate Finance Trust. The managed pool consists of four whole loans plus 16 loan participations backed by 85 properties across 15 states. Multifamily takes the lion’s share of the property-type pie, comprising 60.8 percent of the collateral. 

TPG is diving into the CRE CLO space without water wings, issuing $1.6 billion of CLOs in 2024 alone, according to Connect Money. But they’re not the only ones. Bloomberg recently reported that Blackstone Mortgage Trust is gearing up to issue its first CRE CLO since 2021, and 85 percent of the properties backing it will be residential, hospitality and industrial, as opposed to office properties — the typical majority asset class in days gone by, per Bloomberg. 

Other CRE CLOs this past quarter include the ACREC 2025-FL3. The deal, secured by 25 multifamily properties, has a balance of $983.6 million. 

It’s not all pool bars and cannonball jumps. Below the surface of shiny new issuance is a legacy of distress that’s still being worked through. In January, analytics firm CRED iQ’s CRE CLO distress rate added 130 basis points, bringing it to a high of 15.1 percent. In January that rate was at 8.6 percent, the apex being arrived at due to the number of floating-rate loans missing their maturity dates.

And, despite the Fed holding rates steady, recession concerns continue to mount as a trade war — ignited by President Donald Trump’s tariff policies — ensues. 

So, maybe bring your floatie.

Cathy Cunningham can be reached ccunningham@commercialobserver.com.