Just How Slow is Commercial Real Estate?

One key metric we closely track for commercial real estate activity is loan growth. Real estate relies heavily on debt, so it's logical to expect loan growth to align with an expanding economy.

Surprisingly, the data reveals that loan growth in 2020—amid the pandemic turmoil—outpaced that of 2024. Honestly, I wouldn’t have expected it until I reviewed the numbers myself. Deals got done in states like Texas, Arizona and Florida that thrived during the pandemic, while other states ground to a halt with shutdowns and widespread stagnation.

As challenging as 2020 was for both borrowers and lenders, 2024 proved to be even worse. That’s a statistic I find truly startling.

It’s worth noting that 2021 and 2022 were standout years for real estate transactions, which may have pulled some future loan demand forward. Additionally, in the past couple of years we have seen more all-equity deals than in the past, which likely also contributes to the dip in loan activity.

Still, 2024 was astonishingly slow.

Loan Growth by Year:

• 2020: 3.72%
• 2021: 6.60%
• 2022: 10.6%
• 2023: 3.14%
• 2024: 1.14%

Securing the design and approvals for a ground-up development project is a lengthy process—typically one to two years for high-quality infill developments. With the spigot essentially turned off since 2023, even when it reopens, it will take at least one to two years before significant loan growth reappears.

If 2024 felt slow, don’t expect 2025 to be any better.