Commercial real estate lending has gained notable traction for the third quarter as investors showed a renewed appetite for sectors like healthcare and hospitality while continuing to shun office properties. Total commercial and multifamily originations surged 59% year-over-year, with volume up 44% from the prior quarter, according to the Mortgage Bankers Association’s latest report. While the data suggests growing confidence across most of the market, it highlights continued caution around office assets.

"After a slow start to the year, borrowing and lending backed by commercial real estate properties picked up during the third quarter,” said Jamie Woodwell, MBA’s head of commercial real estate research.

Woodwell attributed the rise in originations to a drop in the 10-year Treasury yield, which fell from 4.31% in June to 3.72% in September, although he noted that recent hikes in long-term rates could temper the momentum.

Lenders showed a clear preference for certain property types, with mortgage originations for healthcare properties up a striking 510% from a year earlier. Hotel lending grew 99%, while retail, industrial, and multifamily originations climbed by 82%, 57%, and 56%, respectively. By contrast, lending for office properties declined 3%, following a 20% year-over-year contraction in the second quarter.

Various types of lenders saw originations rise sharply. Depository institutions increased lending volume by 69%, and government-sponsored entities raised their originations by 28%. CMBS originations surged by 260%, and investor-driven lenders boosted their volume by 62%.

MBA’s report suggests that while the overall lending landscape has rebounded, lenders remain selective, focusing on asset classes with stronger demand and more stable fundamentals.

The recent 25-basis-point cut in the federal funds rate suggests the Fed is taking steps to ease economic pressures. If this trend continues, additional fiscal actions could follow, potentially lowering long-term rates and providing further support for resilient real estate sectors like healthcare and hospitality.

As mortgage originations pick up across commercial real estate, the evolving demographic trends across the country will undoubtedly influence where the next wave of investment flows. States like Texas and Florida remain strong candidates for continued investment in healthcare, retail, and hotel sectors due to their continued growth in labor and housing, while states such as Illinois, Washington, and Virginia—home to a significant share of incoming immigrants—could see a shift in investment as rates fall and new opportunities emerge in this new interest rate cycle.