Commercial Lending Markets Mirror Economic Recovery

  • Commercial lending markets strengthened in Q2, with increased lending activity and tighter credit spreads.
  • The CBRE Lending Momentum Index increased by 10.8% from Q1 2021 and is now just 1.8% below its February 2020 pre-pandemic close.
  • Capital markets have been focused on economic growth and inflation trends. In recent weeks, longer-term Treasury yields have declined, as recent inflation is assumed to be transitory. The benchmark 10-year bill recently closed at 1.31%, down by 37 basis points (bps) from its March 2021 close.
  • After peaking in Q3 2020, spreads on seven- to 10-year, 55%-to-65% loan-to-value (LTV) permanent commercial loans continued to tighten in Q2. Commercial spreads tightened by 26 bps quarter-over-quarter to an average of 218 bps. Multifamily spreads tightened by 15 bps to average 192 bps.