The lending environment has changed, but many origination practices have not. Those who continue to rely on outdated methods may find it harder to compete as liquidity becomes more selective and competition intensifies.
The commercial real estate (CRE) market is shifting beneath our feet, and for loan originators, adapting to this transformation is increasingly critical. Those who understand where the market has been and where it is heading could be better positioned to succeed in a significantly altered lending environment.
Over the past five years, the commercial real estate debt market has undergone a transformation that few predicted in its entirety. Between 2018 and 2020, CRE transaction volumes consistently surpassed $600 billion annually, according to Real Capital Analytics, fueled by historically low interest rates that briefly dropped near 0.25% after aggressive Federal Reserve cuts in response to the pandemic. Underwriting standards softened, with average loan-to-value (LTV) ratios for commercial properties often in the range of 70% to 75%, and borrowers benefited from abundant liquidity and relatively fast approvals. Closing times typically averaged under 45 days. Originators operated in an environment where relationships sometimes carried greater weight than precision and where speed was readily available but not always prioritized.
By 2022, however, signs of strain emerged. Inflation surged to a 40-year high of 9.1% by June 2022, prompting the Federal Reserve to raise rates at the fastest pace since the 1980s. The Fed hiked its benchmark rate by more than 500 basis points within 18 months, dramatically increasing borrowing costs. Transaction volumes declined significantly across office, retail, and even multifamily sectors, and cap rates widened while valuations adjusted downward. Debt service coverage ratios became more challenging to meet, and lending standards tightened considerably. A financing market once built on abundance became one defined by caution.
Legacy Methods May Fall Short
Today, the environment has shifted again—but not back to what it was. Rather than simply being “tight,” the market is now selectively liquid. Institutional investors and lenders often favor high-performing multifamily and industrial assets, but Class B and C office properties and secondary retail centers are frequently met with hesitation. Well-positioned assets with resilient cash flows can often secure financing, yet the terms are stricter, the process slower, and competition among originators more intense. Borrowers often encounter stricter underwriting and reduced leverage offers, with LTVs commonly limited to 55% to 65%, compared to the 70%-plus levels of five years ago. According to Trepp, approximately $1.5 trillion in CRE loans are projected to mature by the end of 2025, a figure that underscores not just the scale of refinancing demand but also the growing challenges for lenders and borrowers alike.
In this market, the traditional methods of deal sourcing and execution may no longer be as effective. Relying solely on legacy networks or informal broker channels could prove inadequate when liquidity windows open and close unpredictably. Once considered an accepted cost of doing business, information asymmetry has become a notable risk.
For loan originators, the demands are increasingly clear. They need to move faster, think more strategically, and provide clients with access to broader pools of capital than ever before. This is no longer a business where relationships alone ensure the ideal terms. It is a business where data, speed, and precision often determine success.
Technology platforms like CommLoan have arisen to address this need. Instead of depending on a static roster of lenders, originators using CommLoan’s CUPID™ platform gain access to a nationwide, dynamic network, matching borrowers with the right lenders based on real-time appetite and pricing.
The impact can be significant, particularly given the increasingly cautious lending climate. Recent deals suggest that competitive advantages remain achievable even amid tighter underwriting:
A $1.5 million multifamily cash-out refinance closed in just six weeks with a competitive 30-year amortization—a notable outcome considering today’s stricter leverage and debt service requirements.
Likewise, a $2.2 million owner-occupied retail refinance in Detroit was completed without a single lender fee, demonstrating how broader lender access and smarter borrower-lender matching are playing a key role as liquidity becomes more selective and fees more prevalent.
The Evolving Playbook
These examples point to a broader reality: originators equipped with better tools are often able to close more deals and deliver stronger outcomes for their clients. In a lending market where speed can significantly influence results, platforms that enable instant quoting, transparent competition among lenders, and streamlined documentation are becoming essential.
The broader forces reshaping CRE finance are likely to persist. Higher-for-longer interest rates, selective lender risk appetite, and regulatory scrutiny appear to be the new norms, not temporary aberrations. As such, the evolution of the originator’s role is more than a passing trend—it may represent a lasting change. For originators still relying on the methods of five years ago, the message from the market seems clear: adapt or risk losing ground.
Disclaimer: This article is for informational purposes only and does not constitute financial, investment, or legal advice. Market conditions and lending practices may vary, and readers should consult with qualified professionals before making any lending or investment decisions. Past performance and examples do not guarantee future results.
Published by Jeremy S.
