Community Banks Step Up As Larger Lenders Retreat From CRE

stacks of money_cash_dollars canstockphoto628836 800x315

As economic headwinds, rate volatility, and regulatory changes continue to buffet the real estate market, community banks and credit unions are quietly adjusting their commercial real estate (CRE) lending strategies in ways that reflect both caution and resilience.

A recent white paper from Colliers offers insight into how smaller financial institutions are navigating today’s complex lending environment. Experts from Colliers and Darling Consulting Group discussed the evolving landscape, highlighting the growing importance of flexible loan structures, risk management, and borrower collaboration.

Renewals and Repricing Show Stability

One positive sign: many banks are managing to renew or reprice CRE loans with minimal friction. Even when challenges arise, borrowers are actively engaging with lenders to renegotiate or seek forbearance—a dynamic experts view as a healthy indicator of ongoing borrower-lender relationships and relative market stability.

Focus on the Five-Year Yield Curve

Unlike larger institutions that often track 10-year Treasury yields or broader benchmarks like SOFR, community banks are keeping a closer eye on the five-year point of the yield curve. That’s because most CRE loans operate on three- to five-year cycles. This part of the curve has been more volatile, prompting lenders to offer more nuanced rate structures—including floating and fixed-rate options—with mechanisms like rate locks, upfront fees, or back-to-back swaps.

Underwriting Tightens, Margins Improve

Loan modification requests are on the rise—especially for deals originated in 2023 and 2024—as banks adopt tighter underwriting standards. In contrast to the ultra-low rates seen during the 2020–2022 period, current market conditions involve wider spreads and more conservative pricing models. Many lenders are also padding their balance sheets to prepare for future uncertainty.

Interestingly, improved margins are helping to ease pressure. Some institutions are seeing projected margin gains of nearly 20% thanks to higher interest income, making them less reliant on aggressive deal-making to stay profitable.

The “Barbell” Effect: Old vs. New Loans

Today’s lending environment is marked by a stark contrast between pandemic-era loans issued at 4%–5% interest rates and newer loans priced closer to 7%–9%. This “barbell dynamic,” as described by Darling Consulting’s Jeff Reynolds, is affecting prepayment patterns. Newer loans, especially those with recent modifications, have prepayment rates nearing 30%, while older loans are seeing rates closer to just 5%. This divergence underscores the importance of modeling prepayment behavior more accurately.

Community Banks Step Up

Perhaps the biggest shift is in the market’s structure. Community banks and credit unions now hold a much larger portion of CRE loans than they did a decade ago. And as larger banks reduce their exposure to the sector, smaller institutions are increasingly filling the gap—just as a wave of loan maturities looms.

In short, community lenders are becoming indispensable players in the CRE ecosystem. Through more cautious underwriting, flexible structures, and borrower engagement, they’re not just weathering the storm—they’re helping stabilize the market at a critical moment.

 

Source:  GlobeSt.

 

/by

CMBS Special Servicing Rate Surges To Highest Level In Over A Decade

young business man wearing glasses looking at computer screen_shutterstock_2146725931 800x315

Commercial real estate distress is accelerating, with the latest data from Trepp showing that the special servicing rate for commercial mortgage-backed securities (CMBS) soared to 10.57% in June 2025—the highest level since May 2013. This marks the third consecutive monthly increase and reflects mounting pressure from declining property performance and the growing number of maturing loans.

Over the past year, the special servicing rate has jumped by nearly 225 basis points, climbing from 8.23% to 10.57%. In just the past month, $750 million in loans were newly transferred to special servicing. Meanwhile, the overall balance of outstanding CMBS loans shrank by $8.2 billion, a signal of both falling loan origination and increasing financial strain.

Office Sector Remains Ground Zero for Distress

Office properties continue to bear the brunt of market instability. Trepp reports the office special servicing rate reached 16.38% in June, up sharply from 10.79% a year ago. Despite only a slight increase over the past month, office loans still accounted for $1.7 billion—57% of all new transfers to special servicing.

Mixed-Use, Retail, and Lodging Also Face Growing Challenges

Mixed-use assets had the second-highest distress rate at 12.05%, a slight improvement from May but still significantly higher than the 9.34% recorded in June 2024. Retail properties followed with an 11.93% special servicing rate, up from 10.82% a year prior. Lodging loan distress climbed to 10.11%, a jump from 7.28% last June.

Multifamily properties fared somewhat better. While their special servicing rate reached 8.18%, the sector was one of the few to show month-over-month improvement, dropping by 24 basis points.

Notable Loans Entering Special Servicing

Two high-profile loans illustrate the growing risks in the sector:

  • Ashford Highland Portfolio: This $590.3 million loan backed by 22 hotels across the U.S. was transferred to special servicing due to an impending monetary default. Despite a 2018 valuation of $1.2 billion, occupancy had dropped to 56% by early 2025, with a debt service coverage ratio of 1.41x.
  • 1440 Broadway, NYC: A $415.3 million mixed-use loan secured by a 740,000+ SF property on 41st Street and Broadway is also in special servicing after a maturity default. Formerly anchored by WeWork, the building had just 59% occupancy and a concerning debt service coverage ratio of 0.15x as of mid-2024.

Outlook: Rising Risk Across the Board

The sustained rise in special servicing rates is a clear indicator of systemic stress across commercial real estate sectors, particularly for office, mixed-use, and lodging. With nearly $3 billion in new loans entering special servicing in June alone and loan maturities looming, the second half of 2025 may bring more volatility unless market fundamentals begin to stabilize.

For lenders, investors, and borrowers alike, these trends underscore the need for proactive asset management and renewed focus on risk mitigation strategies.

 

Source:  GlobeSt.

/by

Why South Florida’s Suburban Office Market is Evolving—Not Declining

office and industrial_canstockphoto5780696 800x315

South Florida’s office market has long revolved around its urban cores, but rising construction costs and increasing downtown rents are shifting investor interest toward the suburbs. With more affordable land, easier access, and a decentralized workforce, suburban offices are increasingly seen as valuable assets—especially when paired with upgrades or redevelopment potential.

A Market in Transition

While some suburban office properties are thriving with strategic investments, others are better suited for conversion into multifamily housing, industrial space, or medical facilities. According to Matt McCormack of JLL, the issue isn’t that office space is failing—it’s that alternative uses are outperforming traditional office functions in South Florida’s red-hot market.

Vacancy Pressures and Redevelopment Trends

Colliers’ Q1 data highlights high vacancy rates in suburban areas like Hallandale Beach, Sawgrass Park/Sunrise, and Boca Raton North, signaling redevelopment opportunities. Even in lower-vacancy areas like Doral and Boynton Beach, aging or underperforming office buildings are being razed to make way for apartments, warehouses, or healthcare facilities.

“The commodity office market—those lacking amenities or modern design—is essentially dead,” says Kevin Gonzalez of Colliers.

He notes that demolishing outdated buildings often benefits surrounding upgraded offices by driving demand and raising occupancy in higher-quality spaces.

Amenities Are Key

Office space that thrives today is amenity-rich and experience-driven. Modern tenants expect walkable restaurants, collaborative common areas, fitness centers, and dynamic design. Rent levels also influence redevelopment decisions. In lower-rent areas, the cost to renovate may not justify the return—leading owners to opt for demolition or repurposing.

Areas like Coral Gables are experiencing strong demand because they provide easier commutes, quality infrastructure, and vibrant communities. Nearly half of Coral Gables’ new office leases since 2021 came from companies relocating from Downtown or Brickell.

Suburbs as Viable Office Hubs

Tere Blanca of Blanca Commercial Real Estate says many tenants are seeking quality suburban offices that offer a better cost-to-value ratio. Submarkets like Aventura, North Miami Beach, and Bay Harbor Islands are gaining traction, especially among residents who want to avoid long commutes.

But to succeed, suburban offices must be inviting. Blanca notes that features like cafes, fitness amenities, and event spaces are crucial to luring companies and talent back to the office.

Reimagining Suburban Office Space

There’s still value in many suburban offices—particularly those well-located and updated. Darcie Lunsford of Colliers notes that areas such as Boca Raton, Coral Springs, and Cypress Creek are seeing renewed interest, fueled by residential growth and highway access. She adds that today’s tenants want smaller, high-end spaces with sleek lobbies and a location close to restaurants and shops—not isolated business parks.

“People living in places like Parkland don’t want to drive into downtown Miami,” Lunsford says. “The question many CEOs ask is: can we be closer to where our people live and still operate effectively?”

Medical and Mixed-Use Development Gains Momentum

One segment that’s thriving in suburban markets is medical office space. According to Bert Checa of Lee & Associates, medical offices remain in high demand, largely unaffected by remote work trends. Many older Class B offices in areas like South Miami and Kendall are being converted for healthcare use due to proximity to hospitals.

Adding multifamily to office properties is another strategy developers are embracing. Aventura-based BH Group CEO Isaac Toledano is actively converting parking lots and underused office spaces into apartments and retail hubs, while maintaining or renovating select office buildings. This mixed-use model is boosting office rents and attracting tenants seeking lifestyle-rich environments.

Industrial Emerges as a Powerful Alternative

Some suburban office buildings are being replaced by warehouses, especially as industrial rents hit record highs. Large properties like the former Ryder headquarters in Miami-Dade and Baptist Health’s Boynton Beach facility have been redeveloped for industrial use. David Blount of Foundry Commercial notes that industrial development now outpaces office in many cases, especially where zoning and site size align.

A Silver Lining for Office Space

Ironically, the shrinking supply of office inventory may help stabilize and even boost values for the buildings that remain. JLL reports that over 4.3 million square feet of Miami-Dade office space is expected to come offline soon, with additional reductions in Broward and Palm Beach counties.

That tightening of supply, paired with steady leasing demand, could drive rents upward and breathe new life into South Florida’s office sector.

The Outlook: Office Isn’t Dead—It’s Evolving

While suburban office markets face challenges, they also offer opportunities for reinvention. Developers and investors who adapt—by adding amenities, integrating multifamily or healthcare components, or converting to industrial—stand to gain the most.

As JLL’s McCormack puts it, “Not all office is bad office. In fact, office is poised for the greatest comeback of any sector this decade.”

 

Source: SFBJ

 

/by

Lenders, Borrowers Face Tough Decisions On CRE Debt

loan losses_shutterstock_1793987290 800x315

More than five years after the pandemic shook the commercial real estate world, a huge amount of office-backed debt remains troubled. Many office buildings—particularly older or underused ones—haven’t recovered, leaving billions of dollars in distressed or delinquent loans still unresolved.

According to Trepp, commercial mortgage delinquency rates rose across all lending sources in the first quarter of 2025. The highest delinquency was in commercial mortgage-backed securities (CMBS), hitting 6.42%, up from the previous quarter. By June, CMBS delinquencies climbed further to 7.13%. Unsurprisingly, the office sector is the most distressed, with delinquency reaching a record 11.08%, surpassing its previous high from late 2024.

Some troubled office towers have changed hands recently—usually at steep discounts—but plenty of properties remain in limbo. Many lenders have opted to extend loan maturities temporarily, waiting to see how the market evolves.

Trepp’s chief product officer, Lonnie Hendry, said in a June webinar that we’re still in the early stages of the distress cycle. He noted that many Class B buildings face long-term functional challenges and predicted it will take time before the full scope of distress becomes clear. In comparison, it took several years for delinquency rates to peak after the Great Recession.

Strategies that worked in past downturns—like loan modifications or waiving financial covenants—aren’t proving as effective now because of how drastically the office sector has changed since 2020.

Steven Ginsberg of Ginsberg Jacobs said some of the usual lender tools no longer move the needle: “Those strategies that used to exist just don’t work anymore.”

On the lending side, strong bank balance sheets have helped banks remain flexible, but lenders are increasingly facing tough decisions. It’s been years since the pandemic triggered widespread shifts in how companies use office space, and lenders are now weighing their options: foreclosures, short sales, or other more creative solutions.

However, foreclosures, particularly in cities like New York and Chicago, can drag on for years. That’s why some lenders are carefully mapping out their next steps, according to Paul Grusecki of Hiffman. He said lenders are trying to maintain control over the process and make calculated moves rather than rushing into repossessing buildings.

Some lenders continue to “extend and pretend,” giving borrowers more time while adding clauses that give lenders leverage later—such as appraisal requirements at the borrower’s expense. But signs of lender impatience are growing. Commercial foreclosures rose 27% between the end of 2023 and 2024, with 725 recorded in December 2024, one of the highest monthly totals in a decade.

Owners, too, are making tough choices. Rising maintenance costs and low tenant demand for outdated offices are pushing some borrowers to give up. Grusecki shared a recent example where a broken rooftop air-conditioning unit pushed a borrower to walk away from the property.

Some property owners who have already invested significant equity are deciding whether it’s worth putting in more money—or if it’s better to cut their losses. This has contributed to an increase in office property sales over the past year, often at deeply discounted prices.

Meanwhile, lenders are using a variety of tactics to deal with distressed loans. Some are negotiating deeds-in-lieu of foreclosure, where the borrower hands over the property without going through lengthy court proceedings. Others are selling the loan itself (note sales), although that’s less common due to the complexities involved.

Market watchers agree that at this stage, factors like interest rates are less important than fundamentals like occupancy, operating expenses, and tenant demand. As John Heiberger of Hiffman National noted, small shifts in interest rates won’t save a building that lacks tenants or faces skyrocketing operating costs.

Despite the challenges, most lenders and borrowers have remained cooperative, recognizing that pandemic-driven market disruption—not bad business practices—is the root cause of the distress. And with many longstanding relationships in the real estate industry, parties are working to reach agreements that let everyone move on and avoid protracted legal battles.

As Ginsberg put it: “A lot of lenders and borrowers are going to deal with each other again. They understand each other, they talk about where things are going to end up and want to get there quickly.”

 

Source: TBJ

 

/by

Tracking the Pulse of CRE: New CMBS Data Reveals Shifting Market Metrics

charts and graphs_canstockphoto5373165 800x315

In the world of commercial real estate, few things draw more scrutiny than changes in underwriting metrics—and the latest snapshot from CRED iQ offers a compelling look at how cap rates, interest rates, and debt yields are evolving across major property sectors.

While the analysis is based on a limited set of the most recent ten CMBS (commercial mortgage-backed securities) transactions—a relatively small sample—the insights are still meaningful, especially in a market where timely, detailed data can be hard to come by.

Cap Rates: Wide Swings, Subtle Shifts

Office properties saw the broadest variation in cap rates, with a spread of 632 basis points ranging from 4.31% to 10.63%. The average rate dipped slightly to 7.34%, down from 7.44% earlier this year, suggesting a modest softening in the sector.

Multifamily assets weren’t far behind in volatility, with cap rates ranging from 2.65% to 8.61% and an average of 5.74%, reflecting a decrease from 6.38%. Retail properties showed a narrower but still notable range between 5.13% and 9.19%, averaging 6.28%, down 41 basis points from February.

Industrial cap rates ranged from 3.67% to 7.50% and averaged 5.74%, while self-storage properties had an average of 5.81%, down from 6.22%. Hospitality was the only sector where the average cap rate increased, rising to 7.95% from 7.31%.

Interest Rates: Hospitality Leads in Volatility

Hospitality assets also showed the widest interest rate range—305 basis points—spanning from 5.54% to 8.59%. The sector’s average interest rate climbed to 7.30%. Office deals saw a range of 5.49% to 8.05%, with an average slightly lower at 6.61%.

Multifamily properties averaged 6.50% in interest rates, down marginally from 6.58%, while industrial rates moved higher to an average of 6.81%. Self-storage saw a small drop, averaging 6.47% compared to 6.65% earlier in the year.

Debt Yields: Notable Increases in Multifamily and Office

Debt yields showed some of the most dramatic shifts, especially in the multifamily sector, where the average jumped from 9.50% to 12.9%, with a range stretching from 7.5% to a striking 45.1%. Office debt yields ranged from 10.2% to 36.2%, averaging 13.9%, up from 13%. Retail averaged 12%, slightly higher than February’s 11.6%. Figures for industrial and self-storage were not available in this dataset.

Takeaway

These shifts—both large and small—underscore the complexity and volatility of today’s commercial real estate environment. While the sample size is limited, the data provides a useful lens into how market pressures are impacting underwriting decisions in CMBS deals. For investors, lenders, and analysts alike, keeping a close eye on these metrics is essential as the landscape continues to evolve.

 

Source:  GlobeSt.

/by

Commercial, Multifamily Mortgage Debt Climbs To $4.81T

mortgage debt graphic__photo created by chatgpt 800x315

Commercial and multifamily mortgage debt saw a modest uptick in the first quarter of 2025, signaling continued investor interest and the lengthening duration of outstanding loans. According to the Mortgage Bankers Association (MBA), total mortgage debt increased by 1%—or $46.8 billion—bringing the national total to $4.81 trillion.

Multifamily mortgage debt accounted for a significant portion of that growth, rising $19.9 billion (0.9%) to reach $2.16 trillion. This increase came even as loan originations slowed, noted Reggie Booker, MBA’s associate vice president of CRE research.

The primary holders of commercial and multifamily mortgage debt include:

  • Commercial banks, which lead the pack with $1.8 trillion (38% of total debt),
  • Federal agency and GSE portfolios and mortgage-backed securities (MBS) at $1.07 trillion (22%),
  • Life insurance companies with $752 billion (16%),
  • CMBS, CDOs, and other ABS issuers, which hold $642 billion (13%).

In the multifamily segment specifically, agency and GSE portfolios and MBS dominate with 50% of the debt ($1.07 trillion), followed by:

  • Banks and thrifts with 30% ($639 billion),
  • Life insurance companies at 11% ($242 billion),
  • State and local governments holding 4% ($94 billion),
  • CMBS/CDO/ABS issuers at 3% ($62 billion).

Among all investor types, CMBS, CDO, and ABS issuers posted the largest dollar growth in Q1, adding $16.2 billion (2.6%). Commercial banks and thrifts increased their holdings by $13.1 billion (0.7%), while agency and GSE portfolios rose by $7.5 billion (0.7%). Life insurance companies grew their debt holdings by $6.1 billion (0.8%).

In percentage terms, REITs led with a 4% increase in overall commercial and multifamily debt, while private pension funds saw the steepest drop at 10.6%.

In the multifamily space, banks and thrifts gained the most in dollars, adding $10 billion (1.6%), followed by GSEs and MBS with $7.5 billion (0.7%). Life insurance companies added $1.9 billion (0.8%). REITs saw the largest percentage jump at 10.9%, while private pension funds again posted the biggest decline, down 12.7%.

These figures reflect a resilient and evolving mortgage market as investors continue to find value in commercial and multifamily assets, even in a more cautious lending environment.

 

Source:  GlobeSt.

/by

CRE Market Trends: Smaller Buildings, Bigger Price Tags

stacks of money_cash_dollars canstockphoto628836 800x315

Over the past 25 years, the commercial real estate industry has undergone a quiet but significant transformation. According to a recent analysis by Altus Group, the typical property sold today is smaller in size—but commands a higher price per square foot.

This isn’t just inflation at work. Altus attributes the shift to deeper structural changes in the market, driven by evolving tenant preferences, strategic shifts among investors, and how real estate assets are financed and traded.

Deal Sizes Are Up, Even as Buildings Shrink

Across all major CRE sectors—industrial, multifamily, office, and retail—the median transaction size has increased dramatically. Industrial deals are up 254%, multifamily 266%, office 179%, and retail 172%. But while the dollar figures are growing, the physical size of properties has declined: industrial buildings are 11.1% smaller, multifamily 6.7%, office 16.8%, and retail 11.2%.

The reason? Buyers are paying more per square foot. Price-per-square-foot values have jumped more than 250% for industrial properties, 240% for multifamily, and nearly 200% for both office and retail.

Exceptions During Times of Economic Distortion

There were notable exceptions. After the 2007–2008 financial crisis, industrial properties saw simultaneous growth in both asset size and price, while office and retail prices rose with little change in asset size.

Another outlier came in 2021–2022. Fueled by ultra-low interest rates, investors pursued larger deals at higher prices across all sectors. Altus suggests this was more of a temporary surge than a lasting shift toward larger assets.

Recent Trends: A Partial Rebound in Size

From Q1 2024 to Q1 2025, there’s been a modest reversal in the long-term pattern. Median deal and asset sizes rose across industrial, office, and retail sectors, while prices continued their upward trend—rising roughly 15% across the board. The only exception was multifamily, where building size slipped 1.4% despite a 6.3% increase in deal size.

The sharp increase in median office deal size—up 25.2%—likely reflects investor appetite for high-end, trophy properties rather than widespread recovery in the office sector.

What’s Behind the Smaller Buildings?

Altus points to several factors behind the long-term decline in asset size. Office tenants require less space, retailers are shifting to smaller stores that better support omnichannel strategies, and multifamily developers are focusing on compact urban infill projects instead of sprawling garden-style complexes. Meanwhile, industrial real estate has expanded thanks to the rise of e-commerce and changing supply chain demands.

It’s also worth noting that many institutional or custom-built assets—often held long term or traded through portfolio deals—aren’t included in the median figures.

 

Source:  GlobeSt.

/by

Rising Treasury Yields Stir Concern In Commercial Real Estate

10-year-treasury-yields 800x315

Yields on 10-year U.S. Treasury bonds jumped sharply last Friday following a lukewarm jobs report, unsettling news for commercial real estate professionals already navigating a fragile economy.

This latest rise in yields is another twist in the $28.6 trillion U.S. Treasury market — a key driver of government spending and a benchmark for commercial real estate debt. While federal tariff policy has recently grabbed headlines, bond investors are more concerned with rising deficits and long-term fiscal health.

For commercial real estate, the rising yields signal growing costs of capital. Many property owners are finding it harder to delay tough decisions, as the once-prevalent “extend-and-pretend” and “survive until 2025” strategies face mounting pressure.

“The bond market is basically taking away hope,” said Pat Jackson, CEO of Sabal Investment Holdings. “We never believed interest rates alone would save anyone. It’s time for some real decisions.”

The 10-year Treasury yield has now climbed more than a full percentage point above its September 2024 low, reflecting investors’ concerns over fiscal policy and economic stability. Peachtree Group CEO Greg Friedman warned on a recent podcast that investors need to tread carefully and anticipate potential shocks, including geopolitical disruptions or unexpected events — so-called “black swan” risks.

Some buyers are underwriting deals based on outdated interest rate assumptions, which Friedman cautioned could lead to overpaying. Meanwhile, others are bracing for even higher rates, with some traders forecasting 10-year yields over 5% following recent credit downgrades and widening budget deficits.

Investors are also watching Washington closely. Congress faces a pivotal debate over the federal debt ceiling this summer, and some proposals — like eliminating the borrowing cap — could further erode confidence in U.S. debt, potentially pushing yields higher.

Despite the volatility, commercial real estate transaction activity showed resilience in Q1 2025. According to Colliers, total deal volume rose 17% year-over-year to $92.5 billion, with strong performances in multifamily, hospitality, and industrial sectors. Office, however, remained weak.

Brokers and executives are cautiously optimistic. “Activity is continuing and our pipelines remain very strong,” CBRE CFO Emma Giamartino said, adding that if yields stay below 5%, market momentum should persist.

Yet experts agree: higher-for-longer rates and the looming $1.5 trillion wall of maturing debt in 2025 will shape the market. With refinancing becoming more difficult, especially for distressed assets, many owners face limited exit strategies.

“The value increase they were banking on never materialized,” Jackson said. “That’s why firms like ours are stepping in.”

In this climate, caution, realism, and adaptability will be essential for navigating what lies ahead in commercial real estate.

 

Source:  Bisnow

/by

Industry Analyst Advises Dealmaking Sooner Than Later

Business handshake, the deal is finalized_canstockphoto18035820

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.

/by

March Marks Slowest Month For CRE Transactions In Nearly A Year

monitoring trends_magnifying glass over business charts_canstockphoto14227903 800x315

March marked the slowest month in nearly a year for commercial real estate (CRE) transactions, with deal activity dropping 3.9%, according to the latest SitusAMC Insights report. Most property sectors saw a decline, with the exception of industrial and hotel assets.

Despite the overall slowdown, there are early signs of a market rebound. The report notes that CRE returns rose by nearly 40 basis points in Q1, reaching their highest level in almost three years. While income returns held steady, they remained near their strongest point since 2016—suggesting that CRE continues to offer a stable income stream.

In today’s unpredictable financial environment, CRE is increasingly viewed as a safe-haven asset, the report said. Investor interest in the sector remained strong throughout the first quarter, bolstered by the perceived stability of real estate amid ongoing high interest rates.

Multifamily properties (apartments) have particularly caught investors’ attention, thanks to their consistent cash flow potential. However, lingering uncertainty—especially around the broader economic outlook and potential policy shifts under former President Trump—has made many investors cautious.

The shift in sentiment was evident in investor recommendations: those advising to hold CRE assets jumped to 70% in Q1 (up 14 percentage points), while those recommending a buy dropped to 23%—erasing gains seen at the end of last year. Selling sentiment also declined, dropping from 11% to 7%.

For the second quarter in a row, CRE posted positive annualized returns, clocking in at 2.7%—the highest since mid-2022. Meanwhile, cap and discount rates remained stable during the first quarter, based on SitusAMC’s proprietary investment data.

Adding to the cautious optimism, new supply across most property types is slowing—a trend that could support future rent increases. Office and retail completions hit record lows, industrial supply was at its smallest level in ten years, and new apartment construction fell to its lowest point since 2015.

 

Source:  GlobeSt.

 

/by