Banks are back, baby

Banks returned to commercial real estate lending after an 18-month period of declining new deal volume and reduced originations. During the slowdown, banks focused on resolving troubled office, retail, and multifamily loans by working with borrowers to pay off loans, recognizing losses on impaired debt, and sometimes foreclosing on properties. The shift is linked to a better environment for borrowers to refinance and greater bank willingness to negotiate terms. Mortgage Bankers Association data shows banks originated $455 billion in commercial real estate loans in the first quarter of 2026, up 80% from a year earlier. As banks pulled back, private credit lenders filled part of the financing gap for refinancing and new purchases. Flagstar Bank began originating new CRE loans again in Q4 2025 after pausing due to overweight exposure.

"For a stretch of about two years that seemed to many like an eternity, banks were essentially out of the commercial real estate lending business. Institutions big and small went pencils down on new deals as they worked through loan books burdened with bad office, retail and multifamily loans. But that's starting to change. And now banks normally the lifeblood of CRE finance are back in business."

"Banks originated $455 billion worth of commercial real estate loans in the first quarter of 2026 up 80 percent from a year earlier, according to the Mortgage Bankers Association. Originations grew throughout 2025, following a period of 18 months when the volume of new deals showed a year-over-year decline each quarter. Banks spent that time cleaning up their books: working with borrowers to pay off their loans, taking their lumps on impaired debt and, in some cases, foreclosing on properties."

"The banks' unwillingness to lend made it difficult for borrowers who had to refinance maturing loans and investors looking to finance new purchases. Many turned to private credit lenders, which have stepped in to fill part of the void banks left behind. From March '24 through pretty much the end of '25, we deliberately took ourselves out of originating new CRE loans because we were overweight that asset class, Flagstar Bank CFO Lee Smith said at the Barclays 18th Annual Americas Select Conference in May."

"But in Q4 of '25, we've started originating new CRE loans. Flagstar used to be called New York Community Bank, which rebranded in 2024 after it nearly collapsed due to exposure to New York rent-stabilized properties. Smith said the bank obviously is not looking to do New Y"

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