By Alicia Shepherd, KW Commercial
Date Published: April 2025
There’s an old saying in real estate: “Time kills all deals.” In 2024, we saw the opposite emerge just as often—waiting saved some deals from ever happening at all.
I’ve been in the capital markets world long enough to recognize when debt isn’t just expensive—it’s constrictive. And that’s exactly where we landed by Q4 of 2024. The commercial real estate debt markets didn’t just tighten. They calcified. And brokers, borrowers, and sponsors alike were forced to navigate a capital landscape more reminiscent of 2009 than anything we’ve seen in the past decade.
The data backs it up. According to the Mortgage Bankers Association, total commercial/multifamily borrowing and lending declined by 25% year-over-year in 2024. CMBS issuance cratered by over 30% compared to 2023. Bank-originated debt, particularly from regional lenders, slowed to a crawl—fueled by continued fallout from Basel III endgame regulations and internal stress testing.
Even life companies, typically the steadiest participants in core asset financing, pulled back sharply in Q3 and Q4, citing portfolio rebalancing and rising credit concerns. The Fed’s decision to hold rates steady at 5.25% late into the year did little to free up liquidity, and the yield curve inversion (with the 2-year holding above the 10-year for nearly 18 months straight) distorted long-term underwriting assumptions across asset classes.
But the macro story is only half of it. On the ground, we’ve been watching a second, quieter crisis unfold—what I call refinancing disillusionment. Properties acquired or financed in 2020 or 2021, under historically low interest rates and often with aggressive IO structures, began maturing in earnest this year. And the math no longer worked.
I’ve sat at tables with institutional sponsors facing negative leverage on stabilized assets. We’ve had to explain to bridge borrowers that their “extension options” weren’t options at all—they were pipe dreams. In LA, we’re seeing 65% of refinanced multifamily deals trade down in loan proceeds. Office? It’s closer to 80%.
What’s worse is that there’s no single villain. Lenders aren’t overreaching. They’re protecting solvency. Borrowers aren’t reckless. They’re boxed in. The new cost of capital has transformed how assets perform—even when their operations haven’t faltered.
We used to talk about interest rates as a headwind. Now they’re a wall.
So where does that leave us going into Q1 of 2025?
Some opportunities are beginning to surface—not because capital has freed up, but because sponsors are finally capitulating. We’re seeing loan sales begin to rise. Special servicers are circling. And private debt funds are taking meetings again—but on their terms, not yours. If you need 65% LTC, you’re likely to get 50%. If you want a 10-year fixed quote, you’d better be bringing pristine tenancy and an exit story.
It’s not all bleak. In fact, if you’re well-capitalized and understand the moment, it’s a prime time to buy with discipline. We’re entering a cycle where real returns will come not from cap rate compression or rent growth—but from solving for capital structure in creative, risk-adjusted ways.
But that takes skill. And that’s the difference in 2025. Brokers and capital advisors can no longer simply “run the deal through the lenders.” They need to structure, challenge, re-underwrite, and—above all—educate. Clients who don’t understand the cost of waiting in this market are likely to miss their window altogether.
For our team at LAUNCH Capital, the conversations this year aren’t about velocity. They’re about viability. We’re not closing more. We’re closing smarter.
Because in this market, capital isn’t just money.
It’s strategy.