CRE Lending Reaches a Five-Year High as Alternative Lenders Take the Lead

Commercial real estate lending activity surged to its strongest level since 2021 in Q1 2026, according to CRE Daily and the latest CBRE Lending Momentum Index. The data points to a meaningful loosening of credit conditions — and a clear shift in who is doing the lending.

The Lending Environment Is Loosening

CBRE's Lending Momentum Index — which tracks the pace of U.S. commercial loan closings over a rolling 36-month period — rose to 1.5 in Q1 2026, up from 1.2 in Q4 2025 and just 0.3 a year earlier. Commercial mortgage spreads tightened modestly to 181 basis points for fixed-rate loans with 55% to 65% loan-to-value ratios, while multifamily spreads dropped 13 bps year-over-year to 136 bps. Average mortgage interest rates fell 110 bps quarter-over-quarter to 5.7%, and lender risk tolerance is creeping back — average commercial LTVs climbed to 61.5% from roughly 59% a year ago.

Loan Sizes Are Scaling Back Up

Average commercial loan sizes increased 14% year-over-year in Q1 2026, a signal that deal flow and recapitalizations are scaling up alongside the broader liquidity recovery. Debt yields remained relatively stable at 9.5%, compared with 9.8% in Q4 2025, suggesting lenders are pricing risk more confidently rather than reaching for yield. Multifamily LTVs also moved higher, rising to 67.2% from 65% a year ago.

Alternative Lenders Take Center Stage

Debt funds and mortgage REITs accounted for 53% of CBRE's non-agency loan closings in Q1 2026 — a sharp increase from 19% a year earlier. CBRE reports that debt fund lending volume alone surged 280% year-over-year. Banks remained the second-largest source at 22% of non-agency volume, though that share fell from 34% one year ago. Life companies represented 17%, while CMBS lenders accounted for the remaining 8%. The shift is clearest in office and value-add multifamily deals, where borrowers are increasingly seeking the flexible structures that banks have largely stepped away from.

Agency Multifamily Lending Is Strengthening

Government-backed multifamily lending also strengthened during the quarter. Fannie Mae and Freddie Mac originations increased 35% year-over-year to $29.9 billion in Q1 2026. CBRE's Agency Pricing Index showed average fixed agency mortgage rates falling 42 bps annually to 5.4%, helping multifamily borrowers refinance and recapitalize on more favorable terms than at any point since the rate-hiking cycle began.

The Bigger Picture

Taken together, the data points to a CRE lending market that has moved out of defensive mode and into a more constructive phase — one defined by tighter spreads, higher LTVs, rising deal flow, and a structural shift toward private credit. For multifamily owners and acquirers, the combination of stronger agency execution, more aggressive alternative lender appetite, and improving valuations is the most favorable backdrop in years.

For Neighborhood Ventures, this is exactly the kind of environment we look to deploy capital into. Improving liquidity, tighter spreads, and stronger agency execution lower the cost of capital on the multifamily assets we target — and the broader shift toward alternative lenders creates additional flexibility for both new acquisitions and recapitalizations across our portfolio. That's the kind of setup we want to be transacting in.