Over the past few weeks and with the conclusion of several industry conferences to start 2025, the CRE Bridge Lending Market is garnering a lot of attention. In the various conversations we have had with lenders and market participants, it has become clear that there is plenty of capital availability and competition will ensue during 2025 as lenders and borrowers look to navigate the current interest rate and economic environments. In general, bridge lending has become an increasingly essential part of the commercial real estate landscape and entering 2025 is characterized by:
- More competitive pricing: Spreads on bridge loans have tightened by over 50 basis points in the past 120 days, making them an increasingly attractive option.
- More aggressive underwriting: Lenders are lowering underwritten exit debt yields to achieve higher loan proceeds.
- Increased flexibility: Lenders are offering shorter prepayment structures and reducing or eliminating exit fees.
- Strategic refinancing tool: Given the current 10-year Treasury yield of approximately 4.5%, many investors are using bridge loans to recapitalize assets rather than pursue sales.
Bridge lenders have significantly expanded their allocations for 2025, leading to greater competition and more flexible underwriting standards. This trend benefits unconventional deals, properties transitioning from construction, and loans requiring higher leverage. Life insurance companies and some CMBS lenders have also entered the bridge lending space, contributing to the increased availability of capital.
The Federal Reserve’s 2024 rate cuts have decreased the SOFR index by approximately 100 bps, which should have the near term effect of stabilizing property values. This shift is projected to boost sales activity and refinancing opportunities.
From a multitude of recent conversations with bridge lenders, below are the indicative pricing (non-recourse) and LTV/LTC parameters we received by major property type:
Multifamily: SOFR + 275-325 bps; LTV/LTC up to 80%
Retail: : SOFR + 350-400 bps; LTV/LTC up to 75%
Office: SOFR + TBD bps; LTV/LTC up to TBD%; office is currently considered only on a case-by-case basis
Industrial: SOFR + 300-350 bps; LTV/LTC up to 75%
Hotel (Flagged): SOFR + 500-700 bps; LTV/LTC up to 70%
The CRE bridge lending market in 2025 presents numerous opportunities for borrowers and investors, driven by increased capital availability and a relatively favorable interest rate environment. However, challenges remain, particularly in the office sector. Understanding the current pricing parameters and SOFR spreads can help borrowers navigate the evolving market landscape and secure the best possible financing terms.