The Good, The Bad, and The Unknowns in CRE Finance Today

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.

2. 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.