Lenders are ready to support what’s expected to be a more active year for commercial real estate transactions, according to CBRE’s 2025 Canadian Real Estate Lenders’ Report.

The report was unveiled at the CBRE Capital Lenders’ Forum, which preceded the RealCapital conference at the Metro Toronto Convention Centre on Feb. 25. 

The report analyzed responses from 37 domestic and foreign lenders — which combined to represent more than $200 billion in commercial real estate loans — to a 38-question survey on activity expectations, lending terms and criteria, and lender sentiment and preferences. The survey was conducted from Dec. 10 to Jan. 20.

More than 95 per cent of respondents said the top source of demand for real estate loans will be refinancing and renewals. 

“Lenders are supporting what is likely the largest refinancing wave on record, as groups will renew or refinance after signing mortgages when the Bank of Canada's key policy rate sunk to historically low levels during the COVID-19 pandemic,” CBRE Capital senior vice-president Jessica Harland said.

She presented some of the survey results along with CBRE Capital senior VP Joshua Sunshine. 

Lender sentiment has improved

While some challenges persist within certain asset classes, overall lender sentiment has improved.

Seventy-six per cent of lenders expect higher loan origination volumes relative to last year, and 24 per cent are preparing to deploy 20 per cent or more real estate lending capital in 2025. Seventy per cent of lenders plan to very actively or actively compete on deals, which marks a significant jump from the past couple of years.

Uncertainty surrounding underwriting property valuations is the main challenge, according to 57 per cent of lenders.

While Toronto, Vancouver, Montreal and Ottawa remain the top markets of choice for lenders, Calgary and Edmonton are seeing the largest increase in lender appetite.

“Alberta was the reason that office and industrial absorption was positive in 2024,” said Harland, a native Albertan. “We have the land and the planning frameworks that make construction less difficult, and economic growth and disposable income remain high.”

Divergence between purpose-built rental apartments and land

Purpose-built rental apartments, particularly those insured by the Canada Mortgage and Housing Corporation (CMHC), continue to be the top targeted asset class for lenders. Seventy-three per cent of lenders plan to increase their budgets for the sector.

“Though many lenders expressed a significant appetite for rental construction, very few of them noted intentions to increase exposure to the land loans needed for the underlying rental construction to happen,” Harland noted. “In fact, 26 per cent are looking to decrease their land exposure.”

Land financing has been significantly influenced by:

• higher interest rates;
• economic uncertainties involving government policies and underlying value;
• the risk of projects not being completed;
• zoning and permitting issues;
• a lack of cash flow;
• longer development timelines; and
• the complexity of development plans. 

“Lenders analyze their existing portfolios for both credit risk and distress,” Sonshine observed. “Development land aside, we noticed that distress risk levels have dramatically declined.”

Challenges with condominium lending

Thirty-six per cent of lenders are asking for greater deposit requirements and shorter payment schedules to secure a condominium development loan. 

More than two-thirds of lenders require 60 to 79 per cent pre-sale commitments for condo construction financing. Given the weaker condo sales market, this will likely be a more significant financing hurdle compared to past years.

“Fifty-nine per cent of lenders were below plan in the condo space, exceeding every other asset class,” Sonshine said.

“This is particularly troubling given that highrise condos have historically, and even recently, accounted for much of our new urban housing supply.” 

Retail sentiment strong; office improving

Nearly half of lenders plan to increase their retail budgets, which is a notable jump compared to the average of 14 per cent over the previous seven surveys. More credit is to be allocated to retail than any other asset class, aside from multifamily, in 2025.

“The increase to retail lending allocations is at its highest point in 10 years, and it makes sense,” Sonshine said. “Retail is defensive, stable and largely needs-based.”

After declining for five consecutive years, lender intentions to increase office budgets rebounded modestly from zero last year to seven per cent in 2025. 

Lenders are favouring office assets with:

• stable, defensive cash flows that can withstand potential vacancy;
• a strong leasing profile;
• capable operators;
• functional physical attributes; and
• transit-oriented locations.

High vacancy rates and renewal uncertainties are the greatest challenges in office lending. Lenders also noted difficulties in establishing benchmark values, which causes underwriting uncertainties for office loans.

“There's a distinctly different approach to financing each asset class,” Harland said. “This will continue through 2025, so it's going to be really important to know which sectors are hot, which are not, and which are just heating up.”

Sustainability considerations

There’s been a noticeable increase in the number of lenders which believe it will now take more than five years before sustainability criteria will start to materially impact loan terms.

“These results are aligned very well with the CMHC’s announcement in June of 2024, where the allocation of points available under the MLI Select energy efficiency criteria were reduced in new rental construction,” Harland said.

“As much as European lenders continue to ratchet up sustainability requirements, it just doesn't seem like those practices or expectations will be a reality in Canada for many years,” Sonshine added.

Sustainability remains an important lending criterion for some lenders, however. Seventeen per cent reported that carbon footprints related to property and other assets are impacting loan availability and terms.