Commercial property lenders shrug off global uncertainty, CBRE survey reveals

Australian commercial real estate lending appetite remains strong despite global economic uncertainty, with more than half of surveyed lenders planning to increase their exposures, according to CBRE’s latest research.

The H1 2025 Lender Sentiment Survey, which polled 34 local and international banks and non-bank lenders after April’s cash rate decision, found that 56% of respondents want to grow their commercial real estate loan books.

No surveyed lenders indicated plans to decrease their exposures, signalling continued confidence in the Australian market.

CBRE’s Managing Director of Debt & Structured Finance Andrew McCasker said, “The domestic banks sit on strong balance sheets and there has been a significant amount of capital raised in the private credit sector. This is underpinning competitive tension and strong appetite for lending to quality assets and sponsors.”

Industrial and logistics properties continue to be the most favoured asset class among lenders, despite recent weakening fundamentals.

The residential sector has climbed in preference, with build-to-sell developments ranking second among preferred asset classes for the fourth consecutive survey period.

Build-to-rent projects secured the third position after experiencing a slight uptick in interest compared to the previous survey.

Data centres have declined in popularity from their H2 2024 highs, slipping from third to fifth in the rankings following Blackstone’s $24 billion AirTrunk acquisition.

The survey reveals ongoing caution towards office assets, with lenders showing greater interest in office repositioning opportunities than stabilised office buildings.

CBRE Debt & Structure Finance Director Will Edwards noted, “Amid caution in the office sector, we are seeing lenders take a considered approach to the sector reflective of flight to quality in the asset class. For Prime and A grade assets in core locations lenders will price aggressively for the exposure.”

The survey identified asset type and location among the top three factors affecting lender appetite for refinancing, reflecting increasing commercial real estate bifurcation across all sectors nationwide.

While Australia’s interest rate cutting cycle is underway, the survey showed unprecedented division among lenders about the terminal rate for this cycle.

More than half of respondents expect two additional rate cuts during the remainder of 2025, but there is no consensus view on where the cash rate will stand by June 2026.

The upcoming May 2025 Reserve Bank decision is expected to provide greater clarity on the trajectory of rate cuts.

The survey also found that credit margins face upward pressure as they rise from cyclically low levels, with 32% of bank and non-bank lenders expecting margins to increase by at least 10 basis points over the next three months.

Interest rate hedging requirements continue to decline, with more than two-thirds of surveyed lenders having hedging requirements between 0-25%.