The U.S. commercial real estate (CRE) debt markets are showing signs of life, if not full-blown buoyancy bringing renewed momentum to property transactions, pricing stability and sector rotation. After a punishing period of higher rates and restricted capital, the flow of fresh debt is nudging the sector toward a more active phase. But in an environment still dominated by caution and elevated finance costs, how sustainable is the rebound?
According to the latest research from Cushman & Wakefield, loan origination volume in U.S. CRE debt has climbed more than 30% year-over-year in the first half of 2025, signalling a re-engagement of lenders and borrowers alike. The uptick in lending is mirrored by a broader wave of fresh capital formation: private funds targeting CRE are on track to raise roughly $129 billion this year a jump of about 38% from 2024.
This influx of capital is doing more than just refill the coffers. It is beginning to feed property sales, improve liquidity, and halt or at least temper the slide in asset values. With debt available again, vendors who sat idle during the rate-shock phases are increasingly willing to transact.
Impact on property sales, pricing and sector rotation
The revived debt market is helping transaction volume tick upward after a prolonged period of dormancy. With more financing available, buyers have greater confidence to pursue acquisitions rather than simply refinancing existing holdings. This transaction momentum is translating into signs of pricing stabilisation across several asset classes.
That said, the recovery is decidedly uneven. Investors are favouring “flight-to-quality” property types, specifically multifamily, industrial/logistics and data-related assets while sectors burdened by structural overhangs, such as office and large-format retail, continue to lag.
In the debt markets, the rise in originations is less about speculative development and more about refinancings and repositioning. For example, banks and lenders are increasingly underwriting deals in segments where fundamentals are holding up (multifamily and retail reuse) versus high-risk development plays.
The consequence: capital is rotating away from weaker sectors and gravitating to asset classes with resilient occupancy, favourable supply-demand dynamics, and income stability. This rotation is reinforcing the notion that not all CRE assets are equal in this new debt cycle.
A few key forces are contributing to the revival:
Together these factors are creating a feedback loop: debt flows enable transactions, transactions validate pricing, pricing encourages further capital deployment.
The big question: is it sustainable?
While the current revival is encouraging, it comes with important caveats. The macro-environment remains far from benign: interest rates are high by historic standards, inflation remains a risk, and growth signals in the economy are cautious. Underwriting assumptions must reflect that the cost of capital is elevated and that duration risk is meaningful.
Few analysts expect a rapid return to the ultra-cheap financing environment of the pre-pandemic years. Deloitte Instead, we may be entering a protracted “normalisation” phase, where debt is available but disciplined, spreads remain elevated and asset selection matters more than ever.
Moreover, pockets of the market remain challenged. The office sector, in particular, faces structural headwinds remote work dynamics, obsolescence risk and a backlog of loan maturities, making it a less natural beneficiary of the debt revival.
Looking ahead for stakeholders
For investors, owners and lenders, the current environment presents both opportunity and caution. Fresh capital is available and debt markets are re-engaging, but success will hinge on selectivity, underwriting discipline and a clear view of risk.
From a strategist’s perspective, the mantra should be: “quality, structure and outcome.” Focus on income-generating assets in sectors with structural tailwinds; insist on conservative leverage and transparent lender covenants; and evaluate exit outcomes under multiple interest-rate and macro-scenarios.
For owners considering disposition or refinancing, now may be a good window to act, especially if debt maturities are upcoming or asset repositioning is required. Taking advantage of relatively improved liquidity and transaction momentum could yield better results than waiting for a “perfect” market.
For lenders and capital allocators, the priority should be to build portfolios with credit discipline, focus on cashflow resilience and avoid over-leveraging in sectors with secular headwinds.
The rebound in U.S. CRE debt origination, rising above 30% year-over-year, marks a meaningful shift in the landscape. Fresh capital is flowing, transactions are picking up and pricing is stabilising. But the mountain is far from fully climbed. High rates, elevated costs of capital and uneven fundamentals mean the recovery remains selective and fragile.
In short: momentum is real, but sustainability will depend on how participants navigate a higher-for-longer interest rate regime, stay disciplined in underwriting and focus on the sectors and assets that offer genuine resilience. For the CRE debt markets, the next chapter is not about a return to the old “easy-money” era, but about building the next cycle on firmer, more sustainable foundations.
