Commercial real estate lenders have tightened their lending practices in response to increased risk and higher capital costs, reducing loan-to-value ratios universally. CMBS providers have notably decreased LTVs by 14% from 2015 to 2023, while the average loan size has doubled during the same period. This shift requires more equity from investors to close deals, presenting opportunities amidst changing financing dynamics in the CRE market. Despite the trend, some anticipate a return to higher leverage as interest rates normalize, although the permanence of this change remains uncertain. The adjustment reflects a broader transition in the market as it adapts to a new reality following years of low interest rates and significant monetary support.
