Today's CMBS Loan Rates

2025 CMBS Loan Outlook: Trends, Challenges, and Opportunities

As we move through 2025, the commercial mortgage-backed securities (CMBS) market continues to evolve in response to shifting economic conditions, interest rate fluctuations, and the performance of key property sectors. While multifamily and industrial assets remain strong, challenges persist in the office and retail sectors, shaping investor sentiment and CMBS issuance strategies.

In this report, Select Commercial, a leading expert in CMBS loans, examines the key factors impacting the market and what borrowers and investors can expect in the year ahead.

Interest Rates and Inflation: A Pivotal Factor for CMBS

The direction of interest rates remains one of the most significant influences on CMBS loan performance. The Federal Reserve's past rate hikes in response to inflationary pressures have led to higher borrowing costs for commercial real estate, impacting loan origination and refinancing activity.

However, as inflation shows signs of moderation, rate hikes are expected to slow or stabilize in 2025. A steady or slightly declining rate environment could:

• Encourage new CMBS issuances by improving affordability.
• Support increased investor demand for CMBS securities as spreads become more attractive.
• Reduce refinancing risk for borrowers facing loan maturities.

Despite this optimism, any unexpected inflationary trends or global economic disruptions could cause volatility, affecting CMBS pricing and spreads.

Property Sector Performance: Diverging Trends in CMBS Loans

The performance of CMBS-backed commercial real estate loans is highly dependent on the strength of their underlying asset classes. In 2025, property sectors continue to show mixed signals, with some outperforming while others struggle with vacancy rates and market shifts.

Multifamily: A CMBS Loan Bright Spot

The multifamily sector remains one of the strongest performers in CMBS, benefiting from high rental demand and population growth in urban centers. However, rising affordability concerns, rent regulations, and oversupply in certain markets could introduce risk.

Key trends in multifamily CMBS loans:

• Steady rent growth and occupancy rates support loan performance.
• High investor demand for multifamily-backed CMBS deals.
• Potential challenges from local rent control laws and regulatory policies.

Industrial: Logistics Demand Keeps CMBS Loans Strong

The industrial sector, particularly logistics and warehousing, continues to see low vacancy rates and strong rent growth due to e-commerce expansion and supply chain realignments.

Industrial CMBS loans are expected to remain a stable investment choice, with:

• Increased issuance of CMBS deals tied to logistics properties.
• High investor confidence in industrial-backed securities.
• Minimal risk compared to struggling sectors like office and retail.

Office: The Biggest Question Mark for CMBS Loans

The office sector continues to face high vacancy rates, particularly in older buildings that lack the amenities or flexibility required for a hybrid work environment. While some Class A properties in prime locations continue to perform well, lower-tier office buildings face:

• Higher default risks on CMBS loans due to falling demand.
• Struggles with refinancing and distressed sales.
• Selective investor appetite, leading to weaker pricing in CMBS-backed office deals.

Given these conditions, lenders remain cautious about issuing CMBS loans for office properties unless backed by strong credit tenants or long-term leases.

Retail: Selective Success in CMBS Financing

While e-commerce and shifting consumer habits continue to pressure traditional retail properties, some segments—such as grocery-anchored shopping centers and experiential retail—remain resilient.

Key factors impacting retail CMBS loans:

• Prime location assets continue to perform well.
• Non-essential retail centers face higher default risks.
• CMBS investors favor retail properties with stable, long-term tenants.

CMBS Loan Credit Performance & Risk Factors

Despite economic uncertainty, loan delinquencies and defaults in CMBS deals remain manageable, though certain sectors face increased scrutiny.

Key Risk Factors for CMBS Loan Performance

• Loan Maturity & Refinancing Risk: Many CMBS loans originated in lower-rate environments are now facing higher refinancing costs.
• Debt Service Coverage Ratios (DSCR): Borrowers in weaker asset classes (especially office and retail) may struggle to maintain adequate cash flows.
• Special Servicing & Loan Workouts: An increase in troubled assets entering special servicing is expected in 2025.

CMBS issuers and investors will continue to favor high-quality assets and strong credit borrowers while exercising caution on underperforming property types.

Regulatory and ESG Considerations in CMBS

Regulatory policies and ESG (Environmental, Social, and Governance) factors are playing an increasing role in CMBS loan structuring. Investors and institutional buyers are prioritizing green and energy-efficient properties, while regulators continue to monitor risk in commercial mortgage-backed securities markets.

Key ESG Trends in CMBS Loans:

• Increased demand for “Green CMBS” transactions.
• Tighter lending standards for energy-inefficient buildings.
• Regulatory focus on transparency and risk management in structured finance.

Borrowers looking for CMBS loan financing should consider upgrading properties to meet energy efficiency standards, as ESG-compliant assets may secure better loan terms and investor demand.

CMBS Loan Outlook for 2025: What to Expect?

Despite some sector-specific challenges, the CMBS market remains a viable source of commercial real estate financing in 2025.

Key takeaways for borrowers and investors:

• Interest rates stabilizing could drive stronger issuance volumes.
• Multifamily and industrial sectors remain the strongest performers.
• Office and retail-backed CMBS deals will be carefully structured.
• Lenders will maintain conservative underwriting for riskier asset classes.
• ESG considerations will shape new CMBS loan structures.

Select Commercial: Your Partner for the Best CMBS Loan Rates & Terms

For borrowers looking to secure the best CMBS loan rates in 2025, Select Commercial offers expert guidance, competitive terms, and access to top lenders. With deep expertise in the commercial mortgage-backed securities market, our team helps investors and property owners find the right financing solutions for multifamily, industrial, office, and retail properties.

Contact Select Commercial today to explore your CMBS loan options and secure the best rates available!