The Resurgence of CMBS Lending in CRE: What Borrowers Should Know

By Kristin Howes, Assistant Vice President 

After several years of muted activity, CMBS (Commercial Mortgage-Backed Securities) lending is making a notable comeback in 2025. As capital markets stabilize and investor appetite for yield returns, CMBS lenders are re-entering the market with competitive pricing, higher leverage, and a renewed focus on core and transitional assets. 

At Slatt Capital, we’ve seen a marked increase in borrower interest in CMBS executions—particularly for retail, office, and hospitality properties that may not fit the box for life companies or banks. 

Why CMBS Is Gaining Momentum Again 

Several factors are driving the resurgence: 

• Spread Compression: As spreads tighten and benchmark rates stabilize, CMBS pricing has become more attractive relative to other debt sources. Because these loans are securitized and sold to investors, they often come with lower and more competitive interest rates than traditional bank or private lender loans. 

• Higher Proceeds: CMBS lenders are often willing to go up to 80% LTV, making them a strong fit for borrowers seeking maximum leverage or cash-out refinances.  

• Interest-Only: Common in CMBS loans, over 50% of CMBS loans in recent years have been interest-only. These lower monthly payments allow sponsors to reinvest cash into property improvements or acquisitions and can be especially helpful during lease-up periods or early stabilization phases. 

• Non-Recourse Structure: For many sponsors, the appeal of non-recourse debt with flexible prepayment options outweighs the complexity of securitized loans. 

What Borrowers Should Consider 

While CMBS loans offer compelling benefits, they also come with unique structuring and servicing considerations: 

• Standardized Underwriting: CMBS lenders follow strict guidelines, which can limit flexibility on lease structures, tenant credit, or property condition. 

• Ongoing Servicing: Once securitized, loans are governed by strict servicing agreements, and are typically managed by a third-party servicer, which can make modifications or approvals less manageable to borrower needs. 

• Defeasance or Yield Maintenance: Prepayment penalties can be significant, so borrowers should align loan terms with their hold strategy.  CMBS loans often include lockout periods that make early repayment costly or impossible.  

Recent Trends and Deal Activity 

We’ve recently arranged CMBS financing for several retail and office assets in secondary markets—deals that would have been difficult to place with traditional lenders just a year ago. These transactions highlight how CMBS is filling a critical gap in the capital stack for transitional or non-core assets. 

Final Thoughts 

CMBS is not a one-size-fits-all solution, but in the right scenario, it can be a powerful tool for maximizing leverage and preserving flexibility. As the market continues to evolve, borrowers should work with experienced advisors who understand the nuances of securitized lending.