CRE Lending Is Back to a 5-Year High — And Borrowers Pay 329 bps for It

The Signal:

• Capital is flowing again — but through a different pipe.
• Borrowers are trading rate for certainty of execution.
• The banks' retreat is structural, not cyclical.

The financing side of the recovery is as important as the leasing side, and it just repriced. Lending activity is back to a five-year high on CBRE's Lending Momentum Index — its highest since 2021 — but the composition has inverted.

Debt funds and mortgage REITs now originate 53% of non-agency loans, up from 19% a year ago, with debt-fund volume up 280% year-over-year, while banks have pulled back to 22% from 34% under regulatory and balance-sheet pressure. This is not a temporary rotation — it's a rewiring of who provides CRE credit.

The tell is the premium. Q2 all-in rates averaged 6.62%, and borrowers are paying a 329-basis-point premium over bank pricing for private-credit capital, on purpose. In a market where deals still need to close and bank certainty is scarce, speed and reliability of execution are worth more than the coupon.

The structural read ties the day together. Office, industrial, and retail are all recovering into starved pipelines — and the capital funding that recovery is more expensive and more concentrated in non-bank hands than a year ago.

Implications: Sponsors should underwrite to private-credit pricing as the base case, not the bank-market exception, and price the 329-basis-point premium into return math and hold periods. The trade-off is real: pay up for execution certainty, or wait for a bank market that may not re-open on your timeline. For lenders, the debt-fund share gain is durable; for equity, the cost of leverage is now a competitive variable.