CMBS 2.0: What Conduit Lenders Want in 2025

CMBS conduit lending has re-emerged as a competitive capital source after a turbulent period of spread volatility and reduced origination. Spreads have tightened considerably since mid-2024, and conduit lenders are actively competing for market share across several asset classes. For sponsors who have not explored CMBS recently, the market looks meaningfully different than it did 18 months ago.

The asset classes that conduit lenders are targeting most aggressively are multifamily (non-agency), anchored retail, industrial, and self-storage. These asset types offer the stable, predictable cash flows that rating agencies favor, and they have performed well through recent market stress. Office remains a challenged asset class in the CMBS market, with lenders requiring significantly higher DSCR coverage and lower leverage for all but the most institutional-quality properties.

DSCR requirements have evolved. Most conduit lenders are underwriting to a 1.25x-1.30x DSCR based on in-place net cash flow, with stress tests applied at rates 200-300 basis points above the coupon rate. Debt yield has become an equally important metric — most conduit programs require a minimum 8-10% debt yield, depending on asset class and market. Sponsors should expect both metrics to govern sizing.

Loan terms have standardized around 5-year and 10-year fixed-rate structures with 30-year amortization. Interest-only periods are available for lower-leverage deals (below 60% LTV) but are less common at higher leverage points. Prepayment flexibility has improved — defeasance remains standard, but yield maintenance with a par call in the final 3-6 months is increasingly available.

The origination process for CMBS has become faster and more transparent. Most conduit lenders can issue an application within a week of receiving a complete package and close within 45-60 days. The key to a smooth process is a complete initial submission: T12 financials, rent roll, property condition assessment, environmental report, and a clear narrative on the asset and business plan.

For sponsors considering CMBS, the advantages are clear: non-recourse execution, competitive fixed rates, and higher leverage than many bank programs. The trade-offs are prepayment restrictions, reserve requirements, and the reporting obligations that come with securitized debt. For stabilized, cash-flowing assets with a long-term hold strategy, CMBS is often the most efficient capital source available.

We place CMBS debt regularly and maintain active relationships with the major conduit originators. When a deal fits the CMBS profile, we can move quickly to secure competitive pricing and favorable structure. Our role is to determine whether CMBS is the right execution for your specific asset — and if it is, to ensure you get the best available terms from the market.