We asked some leaders in the industry to tell us what they foresee for the commercial real estate market in 2025.
Gary Bechtel, CEO, Red Oak Capital Holdings
I see 2025 as a better year compared to 2024. I believe long-term rates will remain at essentially the same levels as today (10-year Treasury in the 4.20% to 4.40% range) though SOFR should continue to decline, making floating-rate transactions more attractive. I see banks re-entering the markets and providing much needed liquidity in the construction lending, and to a lesser degree bridge space, although they are still dealing with a tremendous amount of impaired assets and maturing loans. Life companies will continue to provide ample, low-leverage permanent and some construction/bridge capital, with significant exposure to office, hospitality and retail. CMBS will continue to gain traction, as will the CLO market, with buyers re-entering the market for these securities. Debt funds will continue to provide numerous parts of the capital stack, either on a standalone basis or in conjunction with the above. And of course, the agencies will provide or acquire the bulk of multifamily financing completed.
Giovanni Cordoves, regional president, Western U.S., KBS
I think we’ll see an increase in investment activity overall, led by a larger volume of deal flow now that interest rate indices are on their way down and the lending environment has become more competitive. I’d expect the private capital participation to continue to be a big portion of the buyer pools (particularly with office in mind) though we should continue to see the institutional side be active buyers on other product types (MHC, industrial, data center, life science, etc.) and begin to wake up a bit on office over the course of 2025.
Brian Holstein, principal, US Hotel Advisors
Bank lending will benefit from deregulation with the change in administration. CMBS lenders will continue to be active. If fed funds rate keeps going lower and five-year and 10-year rates keep going higher or stay the same, you will see more borrowers opt for floating-rate deals over fixed-rate deals.
Jeff Pirhalla, EVP, commercial lending, BankFinancial
The 2025 outlook for commercial real estate presents a mixed picture, heavily influenced by economic factors and evolving market demands. Office spaces will likely encounter continued challenges from hybrid work trends, potentially leading to higher vacancy rates. Conversely, industrial real estate, particularly warehouses and logistics facilities, is expected to thrive driven by e-commerce growth.
The retail sector may stabilize as experiential and interactive retail concepts gain momentum, though underperforming locations could face challenges. Investors are likely to focus on resilient asset classes and explore adaptive reuse opportunities to optimize returns in this dynamic environment.
