The recent MBA CREF conference was illuminating both on a macro forecast level, as well as in several important themes that emerged.MBA is projecting a positive year overall, but not as positive as previously forecasted - MBA revised its 2025 C/MF mortgage lending forecast down to 16% from its August 2024 projection of 24%. MBA’s chief economist and other panelists pointed to a mix of tailwinds and headwinds, including:

  • A strong appetite to lend across all debt types
  • Significant unpredictability – in the 10-year treasury, macroeconomic environment, and the US economic and policy environment
  • Continued elevated interest rates, and borrowers continuing to wait for drops
  • The “wall of maturities,” while an overplayed term, will be reality in 2025 with nearly $1 trillion in CRE mortgages set to mature
  • Lenders will likely take a “no more free extensions” stance, adding to the maturities and forcing some action in the form of sales, refis, loan workouts or foreclosures
Amid this murky outlook, a number of highlights stood out. Here are five key property trends and tips to keep on your radar in 2025.
  1. Prepare a strategy for distressed assets. Delinquency rates are increasing across all asset classes except for industrial. Special servicers are seeing more assets flow in, and not just office.

- Lender Tip: Monitor the property condition closely, as this can be an early indicator of a downward spiral. Leverage your due diligence and valuation consultants to get eyes and ears on the asset, get a handle on whether the condition or property value is declining, and what kind of risks may need to be addressed if the loan heads into a workout scenario. If you need to brush up on the loan workout process and approach to evaluating the property, check out this helpful webinar.
- Borrower Tip: Be proactive and communicative. Reach out to your lender as early as possible if you’re in trouble and be a good partner in the process. Come with a business plan and collaborate.

  • Bridge lending is active (and will likely remain so), driven by a combination of factors including the interest rate environment, challenges in new construction, and a large amount of transitional and potentially distressed assets in the market that will need rehabbed, repositioned or converted.

    • -Tip: Bridge lenders need to properly quantify and underwrite the risks, leveraging tools like pre-close feasibility reviews on the budget, schedule and contractor, as well as regular post-close monitoring inspections to verify percentage complete prior to the release of funds. Projects requiring bridge loans can have significant construction components which come with specific risks. Lenders must think of these bridge loans like construction loans and put proper construction risk management controls in place to protect their interests. Our colleague Charlie Tallinger has written on this previously for GlobeSt.com, here.

  • Mitigate construction challenges with feasibility analysis. Construction headwinds, including labor shortages, fluctuating interest rates, material pricing volatility and potential supply chain challenges due to trade tariffs, may complicate long-term cost forecasting and budgeting. Davis-Bacon prevailing wage requirements add to labor costs, while stricter immigration enforcement has led to subcontractor cancellations.

    • -Tip: Do more up front feasibility analysis to ensure the project budget and schedule are realistic, contingencies are sufficient, and the project team can handle the job.Reserves may need to be adjusted upwards to account for the unknowns.Lenders should not overlook the importance of underwriting the project team – a contractor evaluation can vet the GC, subs and suppliers to ensure they have the capacity, competence and financial stability to perform the job.

  • Combat elevated insurance rates with property resilience data. Potential natural disasters add to strain and unpredictability in the market. Difficulty in insuring properties in prone areas can affect property values due to higher insurance premiums.

    • -Tip: Borrowers/Owners can get detailed resilience evaluations of their properties to aide in insurance premium negotiations. Going beyond just a regional risk classification to understanding a building’s specific climate risk profile and resilience features can give a more accurate picture for an insurance carrier, and a roadmap to make resilience improvements – we have seen some success in lowering premiums from this approach.

  • C-PACE (Commercial Property Assessed Clean Energy) is growing as a green financing tool and as an additional layer in creative financing structures, particularly for new construction and rehabs. The outlook for CPACE is positive and unlikely to be impacted by federal policies as it is handled at the state and local level.

    • -Tip: Work with a good sustainability consultant that knows the state and local requirements your project. CPACE requires the implementation of energy efficiency, water efficiency, and/or renewable energy improvements (existing properties) or features (construction).As lenders at MBA CREF looked to the challenges and opportunities ahead in 2025, many advised taking a creative approach to structuring deals and being ready to jump in and ride the wave when rates dip. With a surge comes the need for due diligence at the speed and scale that the CRE finance industry demands – Partner stands ready to support a resurgence of transactions in 2025.

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