As of Sept. 30, 2025, U.S. banks have reversed a nine-quarter decline in unfunded commercial real estate (CRE) commitments with a second quarter of growth. Unfunded commitments represent the off-balance-sheet credit exposure related to the remaining dollar amount borrowers can borrow under a loan agreement that is expected to be funded in the future. For example, a borrower has a commercial construction loan agreement allowing them to borrow up to $1 million with a current borrowed balance of $200,000; the remaining $800,000 would represent the unfunded commitment.
Unfunded commitments can represent potential future loan growth for banks. An increase in unfunded CRE commitments may reflect growth in real estate construction as CRE loans structured with an unfunded commitment typically consist of construction and land development loans, including one- to four-family residential construction loans and loans with the intent to build or renovate an income-producing or commercial property.
Total Value of Unfunded Commercial Real Estate Commitments Held by U.S. Banks
SOURCES: Consolidated Reports of Condition and Income (Call Report) and author’s calculations.
Outstanding unfunded CRE commitments rose significantly in 2021 and through year-end 2022, when interest rates were particularly low. The elevated levels of unfunded commitments begin declining in 2023 as interest rates began increasing. That trend appears to be reversing as increasing unfunded commitments reflect borrowers’ desire to take advantage of lower borrowing costs or other economic factors.