By Kristen Smithberg, GlobeSt., globest.com | November 12, 2025

Interest rates on CRE loans are lower on average today than they were last year, when the 10-year Treasury yield fell to the 3.6% range, according to a new report from Marcus & Millichap.

A few factors are pushing CRE interest rates down.

The first is the Federal Reserve’s second 25-basis-point rate cut this year, which brought the overnight rate down to the 3.75% to 4% range. That move nudged the 10-year Treasury up about 10 basis points to roughly 4.1%.

By comparison, the Fed cut rates by 100 basis points between September and December 2024, and the 10-year Treasury climbed about 90 basis points. When the 10-year was at its lowest in September, CRE interest rates ranged from the low-5% range for agency multifamily debt to the upper-6% range for bank lending on commercial properties, according to John Chang, chief intelligence and analytics officer at Marcus & Millichap. That dip in rates boosted CRE transaction activity in the fourth quarter by about 20% but whether these recent changes will again lift sales depends on several other factors now in play.

One of those factors is renewed activity among banks, which are moving past the balance-sheet repair and risk-mitigation work that characterized 2024. Many institutions spent last year reducing exposure to CRE default risk by boosting deposits, clearing risky loans or deferring maturities. With much of that work complete, banks may benefit from a more lenient regulatory environment this year that requires lower reserves, helping spur more lending activity, the report said.

Last year, banks accounted for about 27% of loans for properties priced at $2.5 million and above. In the first half of this year, that share has increased to roughly 33%, compared with an average of 40% between 2015 and 2019, according to Marcus & Millichap.

Meanwhile, private lending capital—particularly from debt funds that use more flexible underwriting and don’t require personal guarantees—has flooded the CRE market in recent years. These lenders often focus on shorter-term bridge loans. In the first three quarters of 2025, private CRE lenders raised about $24 billion in capital, up from $11 billion during the same period last year, the report said. This influx of debt liquidity has helped exert downward pressure on borrowing costs.

In addition, with the Fed’s outlook leaning toward additional rate cuts, fewer lenders are maintaining wide spreads and the combination of lower spreads and higher liquidity continues to support a lower-rate environment.

Currently, CRE interest rates are roughly 50 basis points lower than they were a year ago. Agency multifamily debt is running as low as the upper-4% range, compared with the low-5% range last year. Life companies are also quoting in the upper-4% range for select assets, while banks are lending in the low-5% to low-6% range. CMBS debt is running between 5%-7% and debt funds are lending in the 6%- 8% range.

“Debt liquidity has increased, and rates have come down from where they were a year ago,” said Chang.

“At the same time, cap rates remain elevated compared to 2021 and 2022, offering an increasingly positive leveraged yield climate.”

That said, interest rates may not keep falling. Wall Street’s expectations for another Fed rate cut in December have slipped to about 70% over the past few weeks, down from more than 90% before the last cut, according to Marcus & Millichap.

– more at globest.com

 

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