In the spring of 2024, more than one in four U.S. banks told the Federal Reserve they had raised the bar for commercial real estate borrowers. The net share of lenders that tightened CRE standards hit 26 percent, according to the Fed’s April 2024 Senior Loan Officer Opinion Survey (SLOOS). It was the sharpest pullback since the early weeks of the pandemic, when property markets effectively froze. And it landed just as the national office vacancy rate crossed a threshold that had once seemed unthinkable: nearly one in five square feet of U.S. office space was sitting empty.
Two years later, that Q1 2024 reading still stands as the recent peak of CRE lending caution. The tightening has eased somewhat in subsequent quarters, but it has not reversed. For borrowers, developers, and the regional banks that finance them, the consequences of that inflection point are still playing out across the commercial property market in mid-2026.
What the 26 percent figure actually means
The SLOOS is a quarterly pulse check. Every three months, the Fed asks senior loan officers at roughly 80 domestic banks whether they tightened, eased, or held steady on underwriting standards for major loan categories, then calculates a net percentage. A reading of 26 percent means that, after netting out the handful of banks that loosened terms, more than a quarter of respondents made it harder to get a CRE loan.
Historical SLOOS data, available through the Fed’s data download portal, shows the Q1 2024 figure exceeded every reading since Q2 2020. During the pandemic spike, net tightening surged far higher as banks halted originations amid uncertainty over rent collections and property values. The 2024 tightening was less dramatic in absolute terms but arguably more significant: it reflected not a sudden external shock but a slow-building conviction that the commercial property market, particularly the office sector, faced structural problems that were not going away.
The tightening showed up in concrete ways. Borrowers encountered wider loan spreads, lower loan-to-value caps, shorter terms, and demands for more sponsor equity. Some lenders simply stopped quoting on certain deal types altogether. Construction and land development loans, among the riskiest CRE categories because they depend on projected rather than existing cash flows, saw especially strict treatment.
The vacancy crisis that spooked the banks
The lending pullback did not happen in isolation. Moody’s Analytics reported that the U.S. office vacancy rate reached 19.8 percent in Q1 2024, a record at the time. That figure reflected years of remote and hybrid work reshaping how companies use space. Large blocks of offices in downtown cores from San Francisco to Chicago sat unleased, and sublease inventory, often a leading indicator of future vacancy, remained elevated well above pre-pandemic norms.
For banks, rising vacancies translate directly into balance-sheet risk. When a building’s occupancy drops, its rental income falls. Lower income means a lower appraised value. A lower appraisal pushes up the loan-to-value ratio on existing debt, potentially breaching covenants and forcing borrowers to inject fresh equity or negotiate extensions. For new loans, the math is even worse: an underwriter who assumed 12 or 14 percent vacancy when the loan was originated now faces a market running near 20 percent. That gap makes refinancing treacherous.
The scale of the refinancing challenge was staggering. The Mortgage Bankers Association estimated that roughly $1.2 trillion in commercial and multifamily mortgage debt was set to mature across 2024 and 2025, with office loans representing a disproportionate share of the riskiest maturities. Borrowers who needed to roll over that debt walked into a market where lenders were pulling back and property values had declined. The combination forced painful recapitalizations, discounted sales, or outright defaults.
The pain was not spread evenly
The 26 percent SLOOS figure and the 19.8 percent vacancy rate are national averages, and they obscure wide variation beneath the surface.
Geographically, downtown office markets in cities with large tech and financial-services footprints bore the brunt. San Francisco’s office vacancy rate exceeded 30 percent by several major brokerage measures in early 2024, according to reports from CBRE and JLL. Sun Belt metros like Miami and Nashville held up better, buoyed by population growth and corporate relocations. Suburban office parks, once written off as obsolete, showed mixed results depending on local commuting patterns and employer return-to-office mandates.
Among banks, the exposure was concentrated unevenly as well. Community and regional lenders with heavy CRE concentrations faced outsized risk. The troubles at New York Community Bancorp in early 2024 offered a vivid case study. NYCB’s stock plunged after the bank disclosed sharply higher provisions for credit losses tied in part to its CRE portfolio, which had ballooned after its acquisition of assets from the failed Signature Bank. The episode underscored how quickly CRE stress could migrate from property markets to bank balance sheets and rattle investor confidence in an entire segment of the banking sector.
Federal regulators, including the FDIC and OCC, had already been flagging CRE concentration risk in supervisory guidance for months before the Q1 2024 SLOOS data reinforced those warnings. The survey itself does not break out responses by bank size or region, a limitation that makes it difficult to know whether the 26 percent net figure reflects broad-based caution or masks pockets of much more severe constraint at smaller, CRE-heavy institutions.
What has changed since the peak tightening
Subsequent SLOOS releases through late 2024 and into 2025 showed the pace of tightening gradually moderating from the Q1 2024 peak. Banks did not rush to ease standards, but the share actively tightening declined, suggesting the most aggressive phase of the pullback had passed. The most recent available surveys indicate that lenders have settled into a cautious but stable posture on CRE, willing to lend on strong deals while remaining wary of office exposure.
The office vacancy rate, meanwhile, has remained near record levels nationally, with only modest improvement in select markets where landlords invested heavily in building upgrades or where large employers enforced stricter return-to-office policies. The structural shift toward remote and hybrid work has permanently reduced the amount of space many companies need, and that reality continues to weigh on rents, values, and the willingness of banks to lend against office collateral.
The Federal Reserve’s interest-rate path has added another variable. Rate cuts, widely anticipated but repeatedly delayed, could relieve some pressure on property valuations and borrowing costs. But lower rates alone will not fill empty offices. A building with 30 percent vacancy does not become a good loan just because the benchmark rate drops 75 basis points.
The refinancing squeeze is not over
For borrowers with maturing loans, the environment as of mid-2026 remains difficult. Lenders are open for business on well-leased, well-located properties, particularly in industrial and multifamily sectors that have held up far better than office. But for owners of older, partially vacant office buildings in soft markets, the refinancing squeeze that the Q1 2024 SLOOS data captured has not fully resolved.
CMBS delinquency rates for office loans have climbed steadily since 2023, according to data tracked by Trepp, and several high-profile office properties in major metros have traded at steep discounts to their pre-pandemic valuations or been handed back to lenders. Each of those transactions resets comparable values downward, creating a feedback loop that makes the next appraisal, and the next refinancing, harder.
The 26 percent tightening reading in Q1 2024 was a signal, not a one-quarter anomaly. It captured the moment U.S. banks collectively decided that the risks in commercial real estate, especially office, had grown too large to underwrite on the old assumptions. The conditions that produced that decision, persistent vacancies, uncertain valuations, and a workforce that has permanently changed how it uses office space, are still working through the system. The lending market has stabilized, but it has not returned to where it was, and for a significant slice of the office sector, it may never fully get there.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
