Capital markets activity was on the rise during 2024, with momentum accelerating in the second half of the year, particularly in the lending landscape. The Federal Reserve’s rate cuts that started in September provided a boost to an already-improving liquidity cycle and created a sentiment shift that resulted in a robust fourth quarter. This momentum is expected to continue through 2025 based on current pipelines, but with a focus on the greater uncertainty around rate cuts.
Aggregate investment sales bidding activity was up materially, and institutional capital—led by private equity—is reengaging and winning an increased share of acquisitions, accounting for over half of JLL-awarded sales over $100 million in 2024. The market is seeing more pricing data points but with a bid-ask gap persisting primarily due to bond market volatility.
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From a credit market standpoint, the reduction in borrowing costs at various points of 2024 vs. 2023 and abundance of debt capital are leading to a significant increase in lending for commercial real estate. CRE lending activity is exhibiting strong momentum, with Mortgage Bankers Association having projected a 28 percent increase in loan count for 2024.
Activity by lender type is exceptionally balanced, more than during any other points over the most recent cycles, with no one lender type accounting for more than 25 percent of JLL’s U.S. mortgage-origination activity.
What has come into focus, especially since the third quarter, is the dramatic uptick in activity around larger CRE loans. Loans over $100 million are typically executed via the CMBS/SASB market, money center banks and large international banks, debt funds and a select number of insurance companies and pension funds. Given the balanced dispersion of loan activity, it is important to cover the capital spectrum as JLL routinely see outliers arising via a full marketing process.
2024 saw an increase in liquidity for loans over $100 million for both multi-asset portfolios and single asset executions after a down year for transaction activity in 2023. Based on activity across JLL’s Debt Advisory platform in the U.S., lender quotes for transactions over $100 million were up 29 percent in the second half of 2024 compared to same period in 2023. Here are highlights across the market.
Large loans dominate
Industry-wide SASB transactions in 2024 totaled approximately $70 billion, according to data tracked by Green Street. This exceeded total activity for 2022 and 2023 combined, with levels approaching the record SASB origination volume set in 2021. In the last 12 months, JLL has advised on more than $5.5 billion of SASB loan originations, including a 44-property, 7.55 million-square-foot industrial portfolio for Blackstone that priced and closed in the fourth quarter of 2024. JLL also has $7 billion of SASB transactions in the pipeline. This has been a critical part of the lending spectrum creating liquidity for large loans, allowing for pay-offs of maturities that otherwise might need to be extended.
Big banks are back
After having been less active during the first half of 2024, money center banks and international banks are again quoting and closing larger loans on their balance sheet. JLL recently closed a significant balance sheet loan with JP Morgan for a multi-state industrial portfolio, plus closed on $1.2 billion in financings with multiple banks (and one insurance company) for four hyperscale powered shell data center developments in Northern Virginia. Additionally, the firm has sizable balance sheet loans signed up with Wells Fargo and Bank of America. Contributing to banks’ recent uptick in lending activity is an increase in loan payoffs, which is creating new balance sheet capacity.
Insurance companies and debt funds grow their stakes
Insurance companies and large debt funds returned to the market in a meaningful way as allocations increased in 2024 after a down year in 2023. Insurance companies continue to see strong annuity sales while debt funds have near-record levels of dry powder and have benefited from an active CLO market as well as attractive back-leverage terms from their REPO/warehouse lenders, driving notable spread compression over the last 12 months. These lenders have primarily focused on industrial assets/portfolios, retail and multi-housing executions with some interest in alternative property types such as data centers and self storage portfolios. In addition, liquidity for office assets has been improving, evidenced by a 33 percent increase in the number of lenders quoting office loans in fourth quarter 2024 compared to Q4 2023, according to JLL data.
As we look to 2025, credit markets for CRE are expected to remain strong even as fluctuating bond indices lead to continued bid-ask variability. The pipeline for CMBS/SASB executions is robust with strong bond buyer demand. Furthermore, corporate credit spreads are at historically low levels, resulting in better relative value for commercial mortgages. Nearly all lender constituents anticipate higher allocation levels for commercial mortgages in 2025, forecasting a continued path toward more “normalization” in the industry.
Kevin MacKenzie is president of JLL Capital Markets.
