- Key insight: Banks' CRE pipelines are rising again, as lenders gain confidence the sector is on better footing after concerns popped up in 2023.
- Supporting data: Commercial real estate loan originations by banks were 80% higher in the first quarter of 2026 than they were a year earlier, according to a survey by the Mortgage Bankers Association.
- Expert quote: "It's going pretty much gangbusters," — John Toohig, head of whole loan trading at Raymond James
Banks are once again getting hungry for commercial real estate, as fears of a widespread collapse have failed to materialize, at least not yet.
Some property owners are still experiencing hiccups, with some older office buildings and semi-vacant apartments prompting banks to take losses on loans. But industry-wide metrics for credit health have stayed relatively resilient, analysts say.
The good-enough conditions are prompting bankers, who retreated the last few years, to grow their CRE pipelines again. And the loans they're making are better built to withstand today's high interest rates, unlike the credits that faced pressure when the pandemic's ultra-cheap borrowing costs ended.
"It's going pretty much gangbusters," said John Toohig, head of whole loan trading at Raymond James. "I think that's surprising to a lot of people, because when you read the news, you would think that every single [CRE] loan that's been originated in the last five years has gone delinquent or [been] charged off."
CRE loan originations by banks surged 80% in the first quarter of 2026 compared to a year earlier, according to
After being hesitant to grow in CRE, banks are now "in a little bit of a food fight" as they compete for loans, said Brian Foran, an analyst at Truist Securities who covers large and regional banks.
Total CRE loan volumes aren't rising all that quickly, but they started to tick upwards last year and rose at a 2.8% annualized pace in the first quarter, according to Federal Reserve data.
The disconnect between rapidly growing pipelines and relatively sluggish loan volumes is a reflection of the hot lending environment, bankers and analysts say. Banks are indeed making far more CRE loans today, but their net volumes aren't rising all that much, since older loans are getting paid off as property owners refinance elsewhere.
"Paydowns are high. Everyone's refinancing each other's loans," Foran said. "There's only so much demand for actual new buildings."
The remixing may prove beneficial for the industry, Raymond James' Toohig said, since older loans from 2021 that don't "quite make sense in today's market" may officially be history.
Tight pricing
Bankers have flagged the hot lending environment during recent calls with analysts. Some of them caution that the pendulum may be swinging too far in borrowers' favor, leading to pricing pressures for banks.
The CRE market has "gotten very, very competitive," with small and big banks alike fighting for clients, said Jeffrey Tengel, the CEO of Independent Bank Corp. The $24.8 billion-asset bank is staying vigilant and will not "stretch" its loan standards, he said.
Daryl Bible, the chief financial officer of $214.7 billion-asset M&T Bank Corp., sent a similar message.
"We try to be competitive, and we want to make sure we get paid for the risk that we're taking at the end of the day," Bible said.
First Financial Bancorp in Cincinnati had seemed to be within days of closing a roughly $30 million deal, CEO Archie Brown told analysts recently. But the $22.8 billion-asset bank suddenly lost out to a large regional bank, which scrapped covenants that are meant to safeguard the lender.
"When they realized they had lost it, they came back and basically eliminated the covenants," Brown said.
Smaller privately held banks are encountering similar competition, said Matt Pieniazek, president and CEO of Darling Consulting Group. Those smaller banks had gained business thanks to the pullback by midsize banks, some of which faced investor skepticism over their CRE concentrations as fears gripped the industry in 2023, he said.
But with those worries in the rearview mirror, a "lot more banks are back in the game," Pieniazek said. Their return is helping push the spreads that bankers tack onto CRE loans to extraordinarily low levels, he added.
"Loan pricing spreads … are as tight as many of them may have seen in their careers," he said. "Very, very, very aggressive pricing is taking place right now."
Stable footing
Banks are returning to CRE largely because the environment has stabilized.
After taking a hit when interest rates rose sharply, building valuations
"There's properties that are going to continue to struggle, but that tends to be in the minority," said Andy Boettcher, Trepp's head of research.
Long-term interest rates have been rising again of late, as bond markets assess the inflationary impacts of the Iran war. But the climb upwards has been mild compared with the spike earlier this decade. The 10-year Treasury yield rose from below 1% in 2020 to nearly 5% in 2023.
And short-term rates, which are set by the Federal Reserve, are forecast to either stay flat or move up a bit this year — a contrast with the Fed's aggressive rate hikes after the pandemic.
"That's the recipe for creating loan growth, is that you have confidence that you can make a loan without getting smoked on the funding side," Boettcher said.
There are no doubt still pockets of stress, said Michael Fratantoni, chief economist at the Mortgage Bankers Association.
That includes some "less-than-trophy" office buildings in downtowns, he said, as the many companies whose workforces are back in-person prefer higher-tier buildings with amenities.
Multifamily residential buildings in the Sun Belt have also seen pressure, thanks to a pandemic-era building boom that pushed up the supply of apartments and weighed on rental prices. In New York, regulations that limit rent increases are still hampering the multifamily sector.
But any stresses have "remained orderly," Fratantoni said, adding that it's "not nearly as bad as some analysts had forecast."
Risks ahead
The banking industry is also continuing to work its way through the much-feared maturity wall — the date when loans expire and have to be refinanced at higher interest rates.
But the wall is getting a little shorter. The MBA's estimates of a $950 billion maturity wall for 2025 has fallen to a $875 billion wall in 2026, Fratantoni said, a sign that lenders and borrowers are working together to reach deals.
Some struggling properties are still moving to so-called special servicers that help distressed properties find a future, he said. But those that are in solid shape are moving ahead amid the "burst of origination activity," he said, even if some borrowers need to kick in more capital to make a new loan work.
"It could be an opportunity for the lender to make a new loan to a strong borrower who's in a good position," Fratantoni said.
But now comes the next challenge — economic uncertainty tied to the Iran war.
Credit metrics have largely remained healthy thus far, even as hundreds of banks report they had "one-off" issues with borrowers, said Justin Bakst, executive director at Darling Consulting.
After rising from extremely low levels in 2022, CRE loan delinquencies essentially flattened out during 2025, according to S&P Global Market Intelligence
"We see more credit uncertainty today than we had in quite a while," Bakst said.
It's hardly a sure thing, though, that the economy will tank. Resiliency in U.S. consumer spending helped keep the economy afloat in 2022, the last time energy prices spiked, Trepp's Boettcher noted. And consumers continued to spend during last year's tariff turmoil.
A stable job market means people can keep up with their rent payments, office buildings don't suffer from companies cutting back on space, and consumer spending boosts retail properties, he noted.
"As long as the economy continues to perform, whether that's locally or nationally, it's hard to envision that most income-producing properties aren't going to perform," he said.
