CRE Debt Market Sentiment: April 2025

Market Overview

The broader financial markets are in flux. Rising trade tensions and newly implemented tariffs have created a risk-off environment that’s fueling cautious underwriting and tighter investment criteria. However, liquidity remains robust—both on the debt and equity side.

We’re echoing the broader industry view: “slow growth, no recession.” GDP projections remain slightly positive, but inflation could climb as high as 3.2% by year-end. Meanwhile, the 10-Year Treasury yield continues to swing in a wide band between 4.00% and 4.50%, adding to rate uncertainty across the board.

Federal Reserve Watch

Chair Jerome Powell has signaled a deliberate and restrained approach to interest rate policy amid criticism from President Trump. Powell recently expressed concern over tariffs driving up inflation and slowing growth. The Fed’s minutes reflected this tension, citing persistent inflation risk even as they signal up to three 25-basis-point cuts by year-end.

• May Rate Cut Probability: 10%

• June Rate Cut Probability: 66%
  (CME FedWatch data)

The Fed’s balancing act—between labor markets, price stability, and political pressure—will remain a key market driver in the months ahead.

Lender Landscape

Life Companies

LifeCo lenders are taking a defensive stance, pausing new quotes in many cases while honoring existing rate locks. Recent widening in corporate bond spreads has pushed LifeCo spreads out by 10–20bps. Rates for deals under 65% leverage range between 5.60% and 6.50%, with spreads now sitting at 150–225bps depending on deal profile. Low-leverage deals (<60%) still command the most competitive pricing in the mid-5% range.

Banks

Bank lenders are showing resilience and remain active, particularly for stabilized assets with clean rent rolls. That said, some banks are becoming more cautious in line with volatility in the syndicate market. Fixed-rate offerings are typically 3, 5, or 7-year terms with step-down prepayment structures. Recent quotes range from 6.20% to 6.70%, while floating-rate spreads sit between 200–325bps over SOFR.

Debt Funds

Debt funds are revisiting pricing this week due to CLO spread increases (10–20bps). Spreads have widened but remain tighter than 2024 levels. Current pricing ranges between 225–400bps over SOFR, with leverage generally between 60–70% LTC. Debt funds are focusing on stabilized cash flow and lease-up scenarios, especially in the multifamily and industrial sectors. Preferred equity strategies are increasingly popular, especially when layered behind agency debt.

CMBS

The CMBS market is feeling the squeeze of macro volatility, with spread widening of 25–50bps over the last two months. New issuance has slowed, and many lenders are holding quotes until volatility subsides. Recent pricing ranges from 6.50% to 7.25%, depending on deal quality and debt yield. Structures typically offer 5- to 10-year fixed rates, full-term interest-only, and leverage up to 75% LTV.

Agencies (Fannie Mae & Freddie Mac)

Agency lenders have been a stabilizing force this cycle. Despite market turbulence, they’ve kept spreads relatively steady and continued to draw strong borrower interest. Freddie Mac reported a five-year high in weekly submissions, signaling borrower confidence.

Current pricing is holding in the 5.55%–6.20% range, with rate buydowns bringing effective rates as low as 5.25%–5.65% for qualified borrowers.

Sales & Equity Market Activity

Transaction activity is fluid but not frozen. Tariff-driven volatility has prompted selective retrades, but most deals are still progressing. Market participants continue to underwrite conservatively, but equity remains ready to deploy—particularly for assets with strong fundamentals.

Valuation and listing activity across platforms is up significantly.