CRE for credit unions: Managing risk and seizing opportunity in 2026

Fluctuating interest rates, sector-specific challenges, and evolving borrower needs are reshaping the commercial real estate (CRE) market. As a result, credit unions with CRE concentrations increasingly need to strategically manage the competitive pressures and risks associated with origination, refinancing, and loan performance.

Understanding broad market trends and the specific forces affecting credit union portfolios can guide institutions’ decisions and help them prepare for examiner scrutiny of CRE risk.

While recent headlines have focused on volatility for some lenders, the conversation for credit unions needs to be more nuanced. Unlike large banks, credit unions’ CRE exposure often includes more owner-occupied, light industrial, and retail properties, and is less dependent on the fate of urban office towers.

At the same time, credit unions are being called on to fill lending gaps left by lenders retreating from the space. With the right capabilities and risk management strategies, CRE for credit unions is a growth opportunity grounded in safety and soundness.

In many institutions, CRE has grown as a percentage of the loan portfolio, sometimes without strategic intent. The slowdown in auto lending and a steady demand for owner-occupied commercial real estate have contributed to this shift. According to Forvis Mazars data, commercial loans secured by real estate grew by $4.8 billion, or 3.3% in Q3 of 2025, reshaping portfolio composition and exposing gaps in experience or oversight in commercial credit teams.

For credit unions that have historically focused more on consumer lending, this shift requires a re-evaluation of internal capabilities and a heightened focus on CRE-specific credit risk management.

The NCUA 2026 priorities state that examiners’ key focus areas will include:

Examiners will tailor their reviews to your institution’s specific risks, so strong documentation and controls are essential. In recent years, the NCUA has emphasized a more forward-looking, approach to credit and liquidity risk—not just identifying concentrations but also stress testing them to understand their potential impact on capital and earnings under adverse conditions. This means credit unions need to go beyond box-checking and implement dynamic stress testing models that accurately reflect the risk profile of their CRE exposures.

Stress testing tools can help quantify how rising interest rates, vacancy trends, or declining collateral values could affect performance. These models are increasingly critical as credit unions grow their CRE portfolios—especially with more complex or higher-dollar loans.

It’s important to recognize that not all CRE is created equal. For credit unions, it tends to be concentrated in relationship-based lending to local businesses like family-run retail shops, service providers, or small industrial operations. While larger banks may have legacy exposure to high-rise office space or national portfolios, credit union CRE is often more resilient in the face of macroeconomic volatility.

That said, these asset classes still carry risk. Retail lending has faced renewed pressure amid national chains' store closures. Even light industrial space, while generally strong, can be impacted by supply chain shifts and local economic changes. Understanding the localized nature of CRE risk for credit unions is critical when evaluating loan performance expectations and risk-rating practices.

As CRE volumes grow at credit unions, many face a talent or experience gap. Traditional consumer-focused lending staff may not have deep backgrounds in commercial underwriting, construction loan management, or business cash flow analysis. Without proper training, oversight, or access to the right tools, this gap can result in inconsistent underwriting, pricing exceptions, and missed red flags.

Abrigo consultants have worked with dozens of credit unions navigating this exact issue. Institutions that invest in credit training, implement centralized underwriting models, or lean on strategic partners to evaluate and manage CRE for credit unions are better positioned to grow safely.

Moreover, the NCUA has pointed to sound governance and staffing as key components of managing concentration risk in its guidance on credit union supervision.

While commercial real estate originations among banks have shown signs of stabilization through 2024 and into 2025, volumes remain well below where they were before the pandemic, and activity continues to reflect a cautious, disciplined approach by traditional lenders. According to Trepp’s Q1 2025 Bank CRE Loan Performance data, origination volumes edged slightly lower in early 2025 after rising through 2024 and have hovered around early-COVID era levels rather than the pre-pandemic highs.

This measured return of lending, coupled with tighter standards and greater focus on portfolio risk outcomes, has left a gap in certain CRE segments. As traditional lenders retrench or tighten underwriting, credit unions are increasingly seeing demand from business members seeking financing to grow, refinance, or acquire property.

This market dislocation continues to create a window of opportunity for credit unions that are prepared to meet member needs while maintaining prudent risk practices. By combining member-centric lending with enhanced credit risk frameworks—such as stress testing, thoughtful pricing strategies, and deeper due diligence—credit unions can enter this space with confidence.