Multifamily and office sectors show growth even as quarterly originations decline seasonally
Commercial and multifamily mortgage originations surged in the first quarter of 2025, up 42% compared to the same period last year, according to the Mortgage Bankers Association’s (MBA) latest quarterly survey.
While volume was down 40% from the typically more active fourth quarter of 2024, analysts say the Q1 jump year over year is a strong signal of renewed momentum in key real estate sectors.
“The first quarter of the year is typically the slowest, so this level of activity - particularly the strong gains in office, health care, and multifamily lending - signals renewed momentum and growing confidence in key segments of the market,” said Reggie Booker, associate vice president of commercial research at MBA. “Despite ongoing volatility in interest rates and the broader financial markets, borrowers and lenders are finding opportunities to move new deals forward.”
Year-over-year growth
Office property loan originations led the annual gains, jumping 205% in the first quarter of 2025 compared to Q1 2024. Health care property lending followed closely with a 159% increase. Multifamily loans rose by 39%, and hotel property originations were up 30%. In contrast, loan volume for industrial properties fell 2%, while retail property originations declined 3%.
Investor participation also rose year over year. Depository institutions increased their lending volume by 83%, while life insurers boosted activity by 61%. Commercial mortgage-backed securities (CMBS) originations rose 37%, and government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac increased lending volume by 20%. Investor-driven lenders grew originations by 12%.
Quarterly activity
Compared to Q4 2024, total originations fell 40%, in line with seasonal patterns. Lending for retail and hotel properties saw the largest declines, down 66% and 64%, respectively. Industrial property originations dropped 43%, while multifamily and health care properties saw decreases of 41% and 34%. Office lending was the only segment to increase quarter-over-quarter, up 44%.
Read next: Commercial real estate delinquencies could be a massive problem soon
Among investor categories, GSEs and investor-driven lenders reduced loan volume by 51% and 49%, respectively. Life insurers scaled back by 40%, depositories by 39%, and CMBS lenders by 6%.
Fed's regional index
The Federal Reserve Bank of Kansas City’s Q1 2025 CRE Index rose from -0.76 to 0.40, indicating regional activity now sits slightly above its historical average.
According to Fed vice president Nicholas Sly, the gains were largely driven by ongoing construction, material inventory growth, and property completions. However, the influx of new commercial space has tempered rents in several segments.
“Construction activity in the commercial real estate sector continued to rise through the start of the year,” Sly said in the report. “With more commercial property coming available, either from leases expiring or new units being delivered, rents stalled and even declined across several CRE segments within the KC Fed region.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
