December 2025 Commercial Lending Update: Rate Cuts, Debt Walls, and the New Shape of CRE Credit
As we head into December 2025, the commercial real estate (CRE) lending market is caught between two powerful forces: the relief of recent interest rate cuts and the reality of a still-elevated cost of capital and a massive wall of loan maturities ahead.
The big picture: lenders are no longer in full-blown crisis mode, but nobody is pretending we’re back in the easy-money days either. For investors and owners, this is a market for professionals—people who can read the data, adjust quickly, and tell a convincing story to credit committees.
Below is a practical snapshot of where things stand and what smart borrowers are doing right now.
Rate cuts help, but “cheap money” isn’t coming back
After beginning its easing cycle in 2024, the Federal Reserve cut rates again in 2025, giving borrowers some relief after the brutal run-up from 2022–2023. Recent commentary suggests only a limited number of additional cuts are likely, with policy rates expected to settle well above pre-pandemic levels. MBA
That means two things for CRE:
All-in coupons for new commercial loans should drift lower than the peak levels we saw in 2023–2024, especially as credit spreads stabilize.
But borrowing costs are still structurally higher than the “free money” era of the late 2010s and early 2020s.
In other words, rate cuts are a tailwind—but not an excuse to underwrite as if we’re going back to 3% money. Deals still have to work at today’s more conservative DSCR and debt-yield tests.
Regional banks: stressed, but far from dead
One of the biggest questions all year has been: “Are regional banks going to pull out of CRE altogether?” So far, the answer is no—but with a lot of fine print.
Recent data show that many U.S. regional banks have actually seen non-performing CRE loans decline year-over-year, even as office loans remain a glaring weak spot. Banks are actively reducing office exposure, increasing loan-loss provisions, and staying tight on underwriting, but overall CRE portfolios are holding up better than many feared. JPMorgan Chase+2CoStar+2
For borrowers, that means:
Good sponsors with clean, cash-flowing assets can still get bank loans.
Office, older retail, and marginal locations are heavily discounted in lender appetite.
Relationships and transparency matter more than ever.
If your story is “stable income, reasonable leverage, and an experienced team,” banks still want to talk. If your story is “hope the market bails me out,” they don’t.
The debt wall isn’t gone—it just moved
The much-discussed CRE “debt wall” is now very real in lender models. Roughly a trillion-plus in U.S. CRE loans is scheduled to mature over the next few years, with a significant chunk already pushed from 2025 into the 2026–2028 window through extensions and modifications. JPMorgan Chase+2MBA+2
What’s important is not just the size of the wall, but the composition:
Multifamily, industrial, and necessity retail with decent NOI growth are generally refinancing—sometimes at lower leverage, but still clearing.
Office and certain urban assets with flat or declining income are struggling, often requiring new equity, discounted payoffs, or recapitalizations.
The market has become very binary: strong deals are getting done, weak deals are being exposed.
Private credit’s moment in the spotlight
One of the biggest structural shifts in 2025 is the continued rise of private credit and debt funds as major CRE lenders. Estimates put global private credit assets around the $1.5–2.1 trillion range, with projections to more than double by the end of the decade. Commercial Real Estate Loans+3Hiffman+3Deloitte+3
In commercial real estate, private credit has become:
A bridge for transitional and value-add assets that banks won’t touch.
A take-out option for borrowers needing speed or higher leverage.
A creative capital source for recaps, rescue financing, and structured solutions.
The trade-off is price and complexity. Spreads are higher, documents are tighter, and you need to understand call protection, covenants, and performance triggers before you sign.
How Xavier at CRELoans.us is seeing borrowers adapt
On the ground, here’s what I (Xavier at CRELoans.us) see the most sophisticated owners and investors doing as of December 2025:
Segmenting their portfolio into three buckets:
Refi-ready: stable NOI, decent leverage, clear lender story.
Needs recap: thin DSCR, upcoming maturities, but fixable with new equity or structured capital.
Exit candidates: assets where additional time or capital won’t materially improve the story.
Matching lender type to asset profile:
Banks and credit unions for clean, income-producing core and core-plus.
Agencies and insurance companies for the right multifamily and industrial profiles.
Private credit and debt funds for heavy value-add, bridge, and complex capital stacks.
Leading with documentation, not vibes:
Up-to-date rent rolls, trailing-12 financials, capex schedules, and realistic pro formas ready before talking to lenders.
Transparent discussion of risks—vacancy, rollovers, capex—paired with credible mitigants.
Using rate cuts strategically, not emotionally:
Locking in improved terms on strong assets.
Swapping out expensive stopgap or rescue debt when possible.
Avoiding over-leveraging just because coupons drifted down 50–75 bps.
Practical moves to make before year-end
If you’re a CRE owner or sponsor looking at your balance sheet today, here are concrete steps to take in December:
Build a maturity and DSCR dashboard for 2026–2028. Know exactly which loans are at risk in a “no further cuts” scenario.
Identify 2–3 backup lenders (including at least one non-bank or private credit option) for any asset that might not sail through a traditional refi.
For assets you know you want to keep long-term, start the refinance conversation early—lenders reward proactive sponsors.
For assets you’re unsure about, run the numbers on sell vs. refi vs. recap now, while you still have options.
The bottom line
December 2025 is not a “boom” market for commercial lending—but it’s not a bust either. It’s a selective, data-driven market where strong stories, strong sponsors, and strong documentation still get funded.
If you want a second set of eyes on your upcoming maturities or new deals, Xavier at CRELoans.us can help you see how banks, agencies, and private credit will each look at your file—and how to position yourself on the right side of the next credit committee meeting.
