The Quiet Boom in Small-Balance CRE — And the Wave That's Coming Due
How a five-year lending surge is setting up a high-stakes refinancing cycle in 2025–2027.
David Jangro · June 2025
Ask most people what the CRE lending market looks like and they'll describe it in terms of institutional deals, CMBS securitizations, and trophy properties. The segment doing most of the actual work — and generating most of the loan count — operates well below $10M per deal, mostly off the radar.
Small-balance commercial real estate lending has been one of the most active corners of American finance over the past several years. It's also at a turning point.
How Big Is This Market?
Larger than most assume. In 2018, small-balance commercial mortgages — defined at the time as loans under $5M — totaled roughly $225 billion, representing about 39% of all CRE originations that year. The majority of individual loans were under $1 million. This isn't a niche. It's the backbone of local commercial lending.
The market hit its peak in 2021, when CRE lending in aggregate surged roughly 55% over 2020 levels. Within that boom, small-balance lending was particularly active. Multifamily loans between $1M and $7.5M alone totaled $94.1 billion — a 63% increase over 2020 and an all-time record for that segment. Industrial originations hit their own record highs, and even retail staged a comeback as vacancy fell to historic lows and local investors returned. By count, over 2,200 distinct multifamily lenders were active in 2021. The market was deep, fragmented, and moving fast.
2022 remained robust despite rising rates — small multifamily lending tracked toward $64.4 billion, second only to 2021. The slowdown arrived in earnest in 2023, when small-cap CRE sales volumes fell roughly 33% from peak and originations followed suit.
The small-loan market has over 3,000 active lenders, with even the top 15 players holding under 20% market share. It's deeply local — and opportunity-rich for those who know their markets.
Who's Doing the Lending
Community and regional banks have historically dominated the sub-$10M segment — they provided close to half of all loans in this size range in 2022. This makes sense structurally: loans of this size rarely fit neatly into CMBS pools or life insurance mandates, so they typically sit on bank balance sheets or land with specialty finance firms.
The fragmentation of this market — thousands of lenders, no dominant player — is part of what makes it interesting. Large institutions don't prioritize it. Standardization is limited. There's real opportunity for local lenders and direct capital providers who understand specific markets well enough to move with conviction.
The Maturity Wall
Here's where it gets consequential for the next few years.
Most bank portfolio loans written in 2020–2021 carried 5 or 7-year terms. A substantial number are coming due between 2025 and 2028. Across all CRE, roughly 20% of outstanding commercial mortgages — approximately $957 billion — are projected to mature in 2025 alone. That's nearly triple the historical average, reflecting the refinancing bulge from loans originated during the low-rate years.
The refinancing math no longer pencils the way it did three years ago. Interest rates are meaningfully higher. Underwriting standards have tightened. Lenders are requiring more equity and more recourse than they demanded during the boom. For borrowers who financed at low rates and peak valuations in 2020–2022, the path to conventional refinancing isn't always clear.
This creates a bifurcated outcome: well-capitalized sponsors with stabilized properties will find their way through. But a meaningful cohort of borrowers — those with transitional assets, gap equity situations, or unconventional structures — will need bridge capital. The underlying properties, especially multifamily and necessity retail, are largely still performing. The challenge is the financing environment around them.
The Opportunity We're Focused On
The Intermountain West, including Utah's Wasatch Front, was among the most active small-balance markets during the boom — driven by multifamily development, industrial absorption, and strong population growth. Salt Lake City saw record construction loans and permanent take-out financing for new projects in the $5–$15M range. Many of those are coming up for refinancing now.
The coming maturity cycle isn't a crisis. But it does require lenders who can underwrite thoughtfully, move quickly, and structure around the specific constraints each deal presents. Bridge capital — short-term, senior secured, purpose-built — is the right tool for a lot of these situations. That's what we do at Aspera, and it's why this window matters to us.
