CBRE’s latest market data uncovers a lending and investment resurgence that is gaining pace across Europe in 2025, fuelled by aggressive bank activity and a revitalised bond market. With lending volumes surging and investor confidence on the rise, the stage is set for a powerful year in commercial real estate.
Commercial real estate lending kicked off 2025 with extraordinary momentum. CBRE’s Lending Momentum Index climbed 13 percent from the previous quarter and surged 90 percent compared to the same period last year. This marks the highest reading since early 2023, driven by a wave of loan closings in January and February before markets showed slight caution in March. Despite some turbulence, investor appetite remained strong, reflecting renewed faith in the sector’s fundamentals.
Banks emerged as the dominant force in non-agency lending during the first quarter, significantly increasing their market share to 34 percent from 22 percent in the previous quarter. This upswing highlights the strategic shift by banks to expand their lending portfolios in a market eager for capital deployment. Commercial mortgage-backed securities also made a striking comeback, securing 26 percent of non-agency loan activity, nearly tripling their market share from a year ago. This reawakening of the bond market demonstrates that structured finance is regaining its role as a vital capital source.
Across Europe, real estate investment volumes reached €45 billion in the first quarter, reflecting a six percent increase on the year. Over a rolling twelve-month period, volumes surged by 25 percent, hitting €213 billion. This remarkable growth underlines the return of institutional capital, especially into sectors showing resilience and long-term demand trends.
The Living sector continued to capture investor interest, posting a 43 percent rise in activity over the past year. Residential markets, supported by demographic pressures and housing shortages, proved to be a magnet for capital. Retail, often seen as the most challenged asset class, delivered the strongest quarterly growth with a 26 percent increase in investment volumes. This turnaround signals a growing recognition of retail’s evolving value proposition, especially in prime locations and experience-led formats.
Financial conditions remain tight, but the narrowing of credit spreads provided borrowers with windows of opportunity to refinance early and secure funding for new acquisitions. Increased transaction volumes have also unlocked valuation benchmarks in less liquid segments, giving lenders greater confidence in underwriting new deals. These market dynamics have created an environment where capital is flowing more freely, despite underlying macroeconomic challenges.
CBRE’s underwriting data showed average cap rates rising to 6.1 percent, up by 24 basis points on the quarter, while debt yields climbed sharply to 10.3 percent. This pricing reset reflects lenders’ recalibrated risk assessments. Average Loan-to-Value Ratios edged slightly lower to 62.2 percent, signalling a disciplined but active lending landscape.
CBRE’s insights confirm that 2025 has begun with strength, unlocking new opportunities across the capital stack. As banks, bond markets, and private investors mobilise capital, the outlook for commercial real estate investment remains robust.
Real Estate Credit Investments Limited (LON:RECI) is a closed-end investment company that specialises in European real estate credit markets. Their primary objective is to provide attractive and stable returns to their shareholders, mainly in the form of quarterly dividends, by exposing them to a diversified portfolio of real estate credit investments.
