Industry Analyst Advises Dealmaking Sooner Than Later
As we progress through 2025, commercial real estate (CRE) investors are presented with a dynamic market landscape. While some may hesitate, industry experts suggest that now is an opportune time to engage in dealmaking.
Rising Treasury Yields and Market Volatility
John Chang, Chief Intelligence and Analytics Officer at Marcus & Millichap, highlights several factors contributing to increased pressure on the 10-year Treasury yield. These include Moody’s downgrade of U.S. credit, financial market volatility, and broad-based uncertainty. Additionally, the Congressional Budget Office projects a $1.9 trillion increase in the federal deficit for 2025, necessitating increased Treasury issuance. Chang advises that investors consider locking in loan rates early to hedge against potential increases.
Shifting Dynamics in Global Capital Flows
International demand for U.S. Treasuries is waning, with countries like Japan and China reducing their holdings. This shift, coupled with the Federal Reserve’s reduction of its balance sheet, may lead to higher interest rates. For sellers, rising rates could push capitalization rates up, potentially eroding property prices. Chang cautions that waiting on the sidelines might not be advantageous, as there are still opportunities for positive returns through property upgrades and management improvements.
Strategic Approaches for Investors
To navigate the current market effectively, investors should focus on value creation through property enhancements, management improvements, and strategic tenant mix adjustments. These strategies can yield positive leverage and returns over a relatively short time span.
In conclusion, while the market presents certain challenges, proactive and strategic dealmaking in 2025 can lead to favorable outcomes for commercial real estate investors.
Source: GlobeSt.
