CRE Investment Sales Rose Nearly 20%, Loan Originations Increased 48% Through Q3

If 2025 will be remembered for anything other than tariffs, it might be the slow recovery of commercial real estate capital markets. 

A new report from Newmark found that CRE investment sales have increased 19 percent year-over-year through the end of the third quarter, while CRE debt originations volumes, buttressed by a decline in interest rates, have risen 48 percent in 2025, compared to 2024. 

Joe Biasi, head of commercial capital markets research at Newmark, told CO that most of the origination volume has come out of a wave of refinancings, with the lower interest rate regime initiated by the Federal Reserve this summer jump-starting a wave of revised mortgage agreements and a re-evaluation of the bid/ask spread between buyers and sellers.  

“The third quarter was a continuation of the trends we’re seeing throughout the year, particularly a strong momentum on the lending side, as we’ve seen a lot of refinancings,” said Biasi. “We’ve seen pricing flatten out over the last 12 months, and the third quarter was really strong in terms of lending and transaction volumes, as well.”

CRE origination volumes this year have exceeded pre-pandemic norms, with refinancings making up 55 percent of all debt originations, compared to 47 percent from 2017 to 2019. 

Sectors such as office and hospitality, which have been hit particularly hard by the post-COVID distress, were responsible for most of the refinancings as tighter lending spreads and greater debt availability have brought borrowers and lenders together to find mutually acceptable outcomes, according to Newmark. 

Debt origination volumes for office increased 77 percent, while origination volumes for retail jumped 65 percent, per Newmark.    

“There were these resolutions to maturing loans that needed to happen,” explained Biasi, who noted that “balloon payments were due, and we’d been kicking the can down the road, and while extensions are still happening, those ones on the margin are being opportunistic and saying, ‘If I can make this pencil at this interest rate now that they’ve come down, I’m going to refinance.’”  

The increased resolution network has created a frothy atmosphere for wider lending. Bank lending is up 85 percent year-over-year, while insurance company and agency lending (i.e. Fannie Mae and Freddie Mac) lending volumes are up 29 percent and 41 percent, respectively.  

National CRE lending has jumped from $395 billion in the first three quarters of 2024 to $587 billion in the first three quarters of 2025.

“There’s optimism,” said Biasi. “We view the lending space, even though spreads are quite low, as a great opportunity for lenders.”

Bank lending’s surge has been aided by the renewed interest by borrowers for commercial mortgage-backed securities (CMBS), as issuance has increased 37 percent year-over-year. 

In total, CMBS securitization activity is on pace for its second-highest mark in the last 18 years, much of it driven by single-asset, single-borrower (SASB) structures, which have generated 57 percent of originations in 2025. 

Biasi noted that while debt funds have largely replaced bank lending volumes across construction loans and mezzanine lending, commercial banks have remained huge players in the senior loan multifamily deals and CMBS executions. 

“They’re doing a lot of CMBS executions where they can take big exposure and bring it to the public market, when they like an asset, especially at a new basis,” he said. “That’s part of how we need to think about lending from now on.”

On the investment sales market, an uptick did occur, as sales rose 15 percent compared to the second quarter of 2025, but still remained 11 percent lower compared to the pre-pandemic 2017-to-2019 level. Office investment sales year-to-date are up 25 percent, while retail is up 29 percent, but the $350 billion in total sales through the end of September lags well behind historical trends. 

“Lower interest rates have been shown to be conducive to transaction volume in the current environment, but it’s not clear how much interest rate relief the market will get from a tariff-induced recession,” wrote Biasi in his report. 

The investment sales deals that are getting done are also smaller than in the past: Roughly 66 percent of all investment sales through the first three quarters are $100 million or less. 

“For buyers to make the math work on the pricing that the sellers want, particularly on industrial and multifamily, the cap rates are so low that the only way to hit your [internal rate of return] targets is if you assume aggressive rent growth … and it’s not there for a lot of markets, and you have to go a little more out on a limb than you want to go for pricing,” explained Biasi. 

“It’s the bigger deals where pricing is narrow,” he added. 

Even so, the big-ticket office transactions in New York and San Francisco have helped set the tone for a sales recovery, especially among institutional buyers: two years ago, only 9 percent of office transactions in New York and San Francisco were by institutional buyers; in 2025 that number is now nearly 40 percent.    

“We continue to see transaction volume pick up,” said Biasi. “To be honest with you, it was a nice quarter — things kind of moved in the same direction, which they had not done in the last couple of years, as it’s been a bit all over the place.” 

Brian Pascus can be reached at bpascus@commercialobserver.com.