What a Long Government Shutdown Means for CRE

October 27, 2025

Policy Featured Finance Investment More National News

Effects may vary, but experts agree that complications are compounding.

The U.S. is now facing its second-longest government shutdown, a week short, at time of publishing, of the 35-day record from late 2018 to early 2019. The current stalemate, which is seeing some 900,000 people furloughed—the most of any such shutdown—could reach a resolution at any time. Meanwhile, CRE is tackling unique challenges as capital funds are halted and key market data remains unreleased.

According to a KBRA report, a prolonged shutdown could lead to spending cuts, interim borrowing and credit pressures—resulting in funding issues, payment delays and project setbacks due to permitting slowdowns and rising costs. Compounding this is the continued uncertainty around interest rates and a very likely second cut coming at the incoming October FOMC meeting.

“This is primarily a confidence and timing headwind—not a liquidity crisis,” Lisa Pendergast, President & CEO of the Commercial Real Estate Finance Council, told Commercial Property Executive. The bright side is that CRE is in a better state than it was two to three years ago. Liquidity and deal pipeline remain strong and bullish, which should present some resilience to offset near-term uncertainty.

Prepare for CRE delays amid government shutdown

“Development and financing that requires federal permits will be delayed. Overall, there is good momentum for transaction volumes of U.S. real estate coming out of the third quarter, which should continue into the fourth. We saw a Top Ten all-time high quarter of transaction volumes in Q3,” said Wei Luo, CBRE Investment Management’s global research director & senior economist.

“Broader issues like the short end of the curve coming down, improving fundamentals in an increasing number of markets and a still-solid economy overall should be more important considerations than the shutdown in the near-to-medium term.”

The delay in permits translates into development delays, which can prove costly across all asset classes. The biggest impact could be felt in metros that have a strong government presence, Luo reasoned.

In Washington, D.C., “it doesn’t feel like there is a shutdown,” added David McCarthy, managing director & head of legislative affairs at CREFC. Despite this, McCarthy believes that delaying access to data even longer is adding to the uncertainty the industry has been experiencing for months.

These delays can result in credit committees being more conservative and contractors pulling back from spending, McCarthy pointed out. It could also have an impact on asset performance if the shutdown continues for long.

“Metros where federal government employment as a share of all employees is relatively high could see some localized spillover impacts, including Washington, D.C., Norfolk, Va., Honolulu, Ogden, Utah, Oklahoma City, Baltimore, San Antonio and San Diego, as federal agencies are often owner/occupiers of their real estate,” Luo said.

Of course, most industry players have activated contingency plans. While access to federal data is suspended, CBRE Investment Management is using private sector platforms and academic surveys to identify strategies. The firm is also monitoring cap rates, leasing fundamentals and REIT market pricing trends to see how the overall market performs.