The LightBox Signal: Our Weekly Analysis of the Top Headlines

Commercial real estate lending surged in Q3, based on a report by CBRE, with U.S. CRE loan closings up 112% year-over-year, the strongest pace since before the pandemic. Banks led the rebound, expanding their share of total lending from 18% to 31%. Average loan-to-value ratios edged up slightly, from 63.3% to 63.8%, signaling a modest but measured increase in banks’ risk appetite. The Mortgage Bankers Association’s Q3 report echoed the trend, showing commercial and multifamily borrowing up 36% year-over-year and 18% over Q2, marking the fifth consecutive quarter of growth.

LightBox Take: After several defensive years, banks are back with healthy balance sheets and a greater willingness to extend CRE debt capital. The rise in lending volume and slight uptick in leverage suggest renewed confidence without signs of excess. Liquidity is returning, property values are stabilizing, and refinancing activity is picking up. For now, the market appears to be in a “sweet spot,” liquid but not overly frothy.

The LightBox Environmental Due Diligence Market Council identified four major challenges facing the market for Phase I ESAs: persistent shortages in specialized areas such as PFAS assessment, permitting, and compliance; evolving standards around PFAS, water quality, and air permitting; economic and market uncertainty; and pressure to deliver reports quickly.

LightBox Take: Despite these headwinds, Council members characterized the overall Phase I ESA market health as moderate to stable, with an average score of 71.4 on a scale from 1 to 100, up from 63.1 in Q2. Council members expect a modest uptick in demand through year-end as delayed projects move forward and typical year-end closings pick up.

The government shutdown created a hiccup in October’s inflation and jobs data, leaving the Fed flying partially blind, leading into its December 10^th meeting. The next full jobs update isn’t expected until early January. With limited visibility, Fed Chair Jerome Powell likened the situation to “driving in the fog.” Markets have noticed. Odds of a December rate cut have slipped to about 52%, down sharply from 95% a month ago.

LightBox Take: Without fresh data on inflation and employment, a third rate cut is far from certain. The Fed may pause rather than risk oversteering. Beneath market optimism lies concerns about a softening labor market and an unclear path for rates, questions that will come into sharper focus as economic reporting returns to normal.

Appraisal reports are rich in data but notoriously time-consuming to analyze. Each year, banks generate millions of data points across thousands of reports. On average, one lender generates approximately 3.7 million unique appraisal data points each year. Yet key details like rent rolls, cap rates, and valuation conclusions remain locked inside PDFs. In a major project, LightBox leveraged AI tools to extract more than 80 fields from appraisal reports, making this data instantly searchable and accessible to lending professionals.

LightBox Take: There is much in the news about AI replacing employees, and while AI will lead to enormous advances, much like the Internet did, successful innovation requires the input of professional judgment and expertise to perfect the process, review output, and make necessary adjustments. AI accelerates the effort, but professionals make it reliable.

This week brought three blockbuster data center transactions, underscoring one of CRE’s hottest, and most inflated, sectors. In Leesburg, VA, SDC Capital paid $615M for a zoned site in “Data Center Alley,” a dramatic uptick from just $57M in 2021. Nearby in Prince William County, Amazon acquired the Devlin Tech Park site for $700M, continuing its dominance in Northern Virginia’s tech corridor. Out west, Lincoln Property Company bought a Chandler, AZ data center for $130M, with plans to retrofit it for water-efficient cooling, a key benefit for a sit in a water-constrained setting.

LightBox Take: Data centers remain CRE’s breakout story of 2025. Surging valuations, infrastructure advantages, and hyperscaler demand are fueling unprecedented growth, especially in Northern Virginia and Phoenix. Developers are paying a premium for sites pre-approved for data center construction and locations with access to the necessary infrastructure.