After several years of retreat, banks are easing back into commercial real estate lending—and retail properties are helping lead the comeback.
According to S&P Global Market Intelligence, 11 of the 18 U.S. banks with more than $1 billion in retail and shopping center loans reported higher balances through 2025. A dozen showed year-over-year increases, reflecting renewed demand in the fourth quarter and a stretch free of major credit surprises.
"Banks steadily reduced their exposure to CRE from the first quarter of 2023 to the fourth quarter of 2025," says Nathan Stovall, director of financial institutions research at S&P Global Market Intelligence.
"They didn't sell lots of stuff. They simply grew them slowly. At the same time, the asset class performed a lot better than thought."
Stovall notes that alarmists had warned of widespread bank failures—"which, of course, didn't materialize." Retail properties have, in fact, been among the strongest performers. Open-air shopping centers started in 2026 on solid footing. Gen Z retail spending is rising faster than that of any other generation and GBT Realty recently doubled down on retail with a $1.3 billion investment.
The data, he cautions, isn't perfect. "The S&P Global Market data isn't an ideal sample because it isn't a 'uniform disclosure,'" he says.
Still, the trend lines are clear: "When you look at something like a grocery-anchored property, performance has been great," Stovall adds. Borrower demand in that segment continues to grow as banks regain confidence.
"It's not as though things are completely gangbusters now," he says, "but you're starting to see things improve.
A lot of money was raised for distress. Where has it gone? They're not going to give it back. A lot of it is finding its way into direct lending. Wherever that price level was, it's higher than it would have been because more of these properties were refinanced than expected, a lot by private credit."
Even with the shift toward private credit, Stovall says underlying banking fundamentals have improved since the last financial crisis.
"You look at tangible equity in the industry, it's 9%. During the [global financial crisis] it was 3%. Reserves are significantly higher than in previous cycles," he noted.
CRE exposure is lower, loan-to-deposit ratios are healthier and overall system-wide protection has increased.
Some banks have even found that lending to private credit can carry less risk than it seems. In a recent earnings call, JPMorgan pointed to an advantage in that space.
"It allowed them to take more senior positions because [the private lenders] were so hungry to make loans. Banks are lending to private credit in some of these positions, but they have a more senior piece of the capital stack. If losses occur, private credit gets hit first," Stovall explains.
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