Originally published in WealthManagement.com 2025 Market Outlook
By Shreya Patel, Vice President
Over the past few years, uncertainty in the lending market has led to a broader slowdown in the CRE acquisitions market. But in recent weeks, we’ve seen some signs of change that bode well for 2025.
Banks—traditional lenders for many real estate borrowers looking to make acquisitions—are getting back into the lending game after more than a year on the sidelines. Deals that banks have shied away from over the past several months are now getting two or three aggressive bank quotes.
While banks scaled back, capital flow continued, with life insurance companies stepping up to help fill the void. These developments point to new opportunities for investors looking to acquire new properties to add to their portfolio. While the last few years have been tough for buyers and sellers alike, 2025 offers a chance to reverse those trends.
A lot of the pain endured by the real estate sector over the last two years is representative of unexpected changes in the lending environment. For example, banks often insisted on cash deposits to secure loans—often 10-20% of the loan amount. This turned borrowers off from bank lending, resulting in traditional bank borrowers seeking alternative lending solutions.
But now, banks are heading into 2025 with intention, which could mean stricter rules on extensions and payoffs that will allow them to lend more effectively. The ones that were strategic and smart about how they lend are now the most active, offering borrowers opportunities to get back into the real estate acquisition market.
Although the return of bank lending brings with it healthy optimism, it’s important for wealth managers and investors to approach this environment strategically as well. Even with these new opportunities, you need to be smart about the kind of financing you look for when making an acquisition.
For example, most banks typically require some level of recourse, which allows the bank to pursue a borrower’s other assets if they default on the loan. As you approach the debt markets, ask yourself—what’s most important to you and your client: non-recourse? Leverage? Flexibility?
No matter what is most important, however, you should cast a wide net for lending options. Different lenders offer different advantages and disadvantages for borrowers looking to buy new properties or refinance existing debt, and smart advisors will recommend looking at all available options before deciding. At BWE, we always advocate leaving no stone unturned when it comes to finding the best loan terms—it always pays off in the end for the client.
It’s also important to plan ahead. If you know you have a deal on the horizon in 2025, you should start tracking lender positions now, so you have ample time to review your options.
Ultimately, everything in the world of commercial real estate is incredibly interconnected, so it’s next to impossible to predict exactly what the acquisition markets will hold in 2025. But the return of bank lending is a positive sign, and by being smart and taking advantage of the changing lending headwinds, you can position yourself and your clients for success in the new year.