We believe that the commercial real estate (CRE) lending recovery is underway as non-traditional lenders continue to grow market share.
Rising interest rates and balance sheet restrictions have contributed to a decline in traditional lender (bank, insurance company, and government-sponsored enterprise) loan volume as a percentage of new originations (1). Investor-driven lenders such as debt funds, mortgage real estate investment trusts (mREITs), and other alternative lenders are increasing their share of mortgage originations.
Figure 1
Note: Index volume of 100 = 2001 origination average. Index volume > 100 signifies growth from 2001 data.
Figure 2
How we got here:
Inflationary concerns necessitated interest rate hikes throughout 2022, causing a 54% decline in commercial real estate (CRE) loan originations from year-end 2021 to year-end 2022. Traditional lenders, with outsized CRE debt exposure and stricter regulatory oversight, faced more balance sheet pressures than other lender types. This opened opportunities for non-traditional lenders, such as debt funds, to address the lending shortfall when origination volume began rebounding in 2023, as illustrated in Figure 1 above.
Current landscape:
As lending activity has recovered, investor-driven lenders have seen larger increases in total volume than other groups (excluding CMBS issuance). Investor-driven lenders increased volume by 52% between 2023 and 20241. This trend continued through the first half of 2025. Outstanding loan data as of Q1 2025 shows that, among all lenders, mREITs in particular saw the largest percentage increase in their share of outstanding mortgages, increasing by 4%1. Through Q2 of this year, Investor-Driven Lenders accounted for 17.5% of new originations, a 30.7% increase from their share of 2023 origination volume (see Figure 2).
Looking ahead:
We maintain that elevated levels of upcoming loan maturities present a meaningful opportunity for investor-driven lenders to continue to grow market share. Moody’s reported that investor-driven lenders raised approximately $500B since 20122 as investors and firms alike have recognized the potential of the strategy. Through Q2 of this year, an additional $27B has been secured in anticipation of the future opportunity (2). If traditional lenders continue to deleverage due to balance sheet pressures, Moody’s estimates that investor-driven lenders have an opportunity to take on an additional $1T in CRE mortgages (2).
We believe that Prospect Credit REIT, LLC (“PCRED”), a non-traded credit REIT managed by an affiliate of Prospect Capital Management, L.P. (“Prospect”), is well-positioned to capitalize on multifamily financing demand which makes up roughly 36% of the $2.9T of upcoming maturities over the next 5 years (3). PCRED is actively pursuing opportunities driven by these maturities, recently sourcing two investments in Class A, stabilized multifamily properties where equity owners refinanced maturing senior debt with PCRED’s debt fund solutions.
For more information, contact PCRED Investor Services at: investorservices@pcredreit.com
(1) Mortgage Bankers Association as of Q2 2025 | (2) Moody’s | (3) Newmark
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