Market Update: Debt Liquidity Rises as CRE Rates Decline

While commercial property sales remain at pre-COVID levels, the debt market continues to present meaningful opportunities for property owners, especially those approaching loan maturities. Recent reporting shows a sharp contrast between muted sales activity and increasingly favorable borrowing conditions.

Key Takeaways for Borrowers

CRE borrowing costs are falling: New data from Marcus & Millichap shows that interest rates on CRE loans are now ~50 bps lower than a year ago. Agency multifamily and life company executions are quoting in the upper-4% range, with banks in the low-5% to low-6% range and CMBS mostly in the 5%–7% range.

Fed policy continues to support lower rates: The Federal Reserve delivered its second 25 bps rate cut in 2025, bringing the overnight rate into the 3.75%–4% range. Combined with narrower spreads and increased lender liquidity, the result is a more borrower-friendly rate environment.

Lenders are actively putting money out: Banks, after a year of balance-sheet cleanup in 2024, have reentered the market. Their share of CRE loans on assets $2.5M+ increased from 27% last year to 33% in the first half of 2025. Debt funds have also raised $24B year-to-date, more than doubling last year’s pace, creating strong liquidity for bridge and transitional deals.

Attractive leverage climate: With cap rates still elevated relative to 2021–2022, today’s debt costs are supporting a more favorable leveraged yield environment for long-term owners.

What This Means for Owners Facing Loan Maturities

A slowdown in sales volume does not equate to a slowdown in refinancing demand. Owners approaching loan maturity remain active—and in many cases, are benefiting from better interest rates today than they had projected earlier this year.

Life companies, banks, credit unions, agencies, debt funds, and CMBS lenders continue to quote competitively, allowing borrowers to:

Lock in lower fixed rates
Improve cash flow
Rebalance leverage
Refinance out of older or restrictive loan structures

As maturity timelines approach across all property types, having a financing partner who can source competitive executions across lender types remains essential.

-Grady Seldin, Vice President

Mike Davis and David Sarnoff of PSRS arranged the $4.65 million refinance of an industrial property in Denver, Colorado. The subject is a 9,775-square-foot single-story industrial kitchen property built in 1962 of masonry construction with 12-foot ceilings, an external loading dock, and 42 surface parking spaces. The space is currently operating as a commercial kitchen with 23 individual kitchens serving the local community a variety of take-out food options. Financed with one of our correspondent life insurance companies, PSRS provided its borrower with a 25-year fully amortizing loan with rate resets every three years.

Exciting opportunities are open across our offices in Los Angeles, Newport Beach, and San Diego:

Commercial Real Estate Analyst – Los Angeles (1 opening): Support producers with underwriting, marketing, and closing while gaining hands-on experience in structuring real estate debt and equity investments.

Commercial Real Estate Analyst / Loan Producer – San Diego: Begin as an analyst supporting top producers with underwriting and deal execution, with a clear path to transition into a producing role.

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