{"id":1004737379,"date":"2024-11-18T06:37:39","date_gmt":"2024-11-18T14:37:39","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004737379"},"modified":"2024-12-04T14:44:49","modified_gmt":"2024-12-04T22:44:49","slug":"2025-cre-outlook-the-year-ahead","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/2025-cre-outlook-the-year-ahead\/","title":{"rendered":"2025 CRE Outlook: The Year Ahead"},"content":{"rendered":"
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\"Panelists<\/a>
CPE Editorial Director Suzann Silverman in conversation with Alexandra Levy, Stephen Quazzo, Barbi Reuter, Shlomi Ronen and Ryan Severino. Screenshot by Michelle Matteson<\/em><\/figcaption><\/figure><\/div>\n\n\n

Watch the webinar.<\/a><\/em><\/p>\n\n\n\n

The whirlwind of 2024 is coming to a close. Commercial real estate went through rate increases, cuts, an election, economic uncertainty and volatility in the capital markets. And that’s just scratching this year’s surface. Yet, overall market fundamentals are looking up.<\/p>\n\n\n\n

As 2025 approaches, Commercial Property Executive <\/em>brought together some of the nation\u2019s top CRE experts. In CPE<\/em>\u2019s 2025 Outlook: Navigating the New Year webinar<\/a>, moderated by Editorial Director Suzann Silverman, executives shared expectations about valuations and transactions, as well as deals that highlighted the current market. <\/p>\n\n\n\n

To set the stage, Ryan Severino, chief economist at BGO, addressed the \u201c800-pound gorilla in the room:\u201d interest rates. After the long series of hikes that have been recently followed by two cuts<\/a>, Severino observed that inflation has slowed considerably and that the worst is likely in the rearview mirror.<\/p>\n\n\n\n

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READ ALSO:<\/strong> Why Aren\u2019t Mortgage Rates Dropping After Fed Rate Cuts?<\/a> <\/p>\n\n\n\n

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All things considered, \u201cThe economy has been nothing short of spectacular,\u201d Severino stated. There is also a general confidence that, over the next 12 to 24 months, the Federal Reserve will pull the figure closer to a \u201cneutral rate.\u201d The hoped effect would be pulling investors off of the sidelines and boosting deal volume.<\/p>\n\n\n\n

Finding investors<\/h2>\n\n\n\n

Transaction activity should start to tick up industry-wide in 2025, it was widely agreed. But it’s essential to get lenders and capital investors back in the game so deals pencil. Shlomi Ronen, managing principal & founder at Dekel Capital, said that more opportunistic and value-add capital is likely to pop up.<\/p>\n\n\n\n

\u201cIf you\u2019ve got the opportunistic capital right now, and can be somewhat of a contrarian, investing in ground-up multifamily development\u2014which is a space we\u2019re leaning into right now\u2014is a great place to be,\u201d Ronen added. Taking a longer-term view and buying office assets could offer similar opportunities.<\/p>\n\n\n\n

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READ ALSO:<\/strong> Life Cos. Drive More Lending, Banks Take Back Seat<\/a><\/p>\n\n\n\n

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Pension funds have had a tough couple of real estate years, yet opportunity is on the way, predicted Stephen Quazzo, co-founder & CEO of Pearlmark Real Estate.<\/p>\n\n\n\n

\u201cThere are some rays of sunshine as we look out into 2025,\u201d he said. \u201cYou have this denominator effect: The stock market continues to boom; the real estate allocation is a lower percentage. So I think they certainly have room in their allocations.\u201d<\/p>\n\n\n\n

For assets looking to recapitalize, equity from long-term investors such as pension funds will continue to be a good source. Foreign lenders may be another. Alexandra Levy, Americas head of debt capital markets at LaSalle Investment Management, said that while it’s difficult to generalize sentiment due to differing regulations, there are signs from overseas.<\/p>\n\n\n\n

\u201cWe are continuing to see international lender interest at the fund-level financing,\u201d Levy said. \u201cThere\u2019s been a shift from property level to fund level. It\u2019s a way to continue to support real estate, either through subscription lines or repo facilities for back leverage, while not having the direct exposure.\u201d<\/p>\n\n\n\n

International banks are also still lending into national markets on a property-level basis, Levy noted.<\/p>\n\n\n\n

Impacts of the election on CRE<\/h2>\n\n\n\n

The other 800-pound gorilla in the room: the presidential election<\/a>. But does it really impact CRE? Barbi Reuter, CEO & Principal of Cushman & Wakefield | PICOR, doesn\u2019t think so. Election cycles and property performance don\u2019t have much of a correlation, according to her company\u2019s data mapping. While the impact on fundamentals is likely minor, she noted that solid GDP growth could positively impact leasing.<\/p>\n\n\n\n

\u201cIn our area, we\u2019ll be looking if potential changes in immigration policy could affect labor shortages,\u201d Reuter said. \u201cCertainly, border states and others are impacted.\u201d<\/p>\n\n\n\n

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READ ALSO:<\/strong> Will CRE Market Conditions Improve?<\/a><\/p>\n\n\n\n

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Local economic policy changes could also impact markets. For example, municipalities and states have to respond and deliver\u2014individually\u2014on things such as clean energy, zoning initiatives and power infrastructure, which could impact CRE on local levels, Reuter noted.<\/p>\n\n\n\n

Quazzo agreed that, from an investment standpoint, some markets are more or less attractive due to their local policies. Specifically, property tax rates and transfer taxes are factors to consider.<\/p>\n\n\n\n

A positive 2025 CRE outlook<\/h2>\n\n\n\n

Considering the strong economy<\/a> going into 2025, Severino said that CRE is starting to see a shift. He noted that, despite sentiment being a more-or-less \u201csoft indicator\u201d in the market, there is a positive anticipation of where rates are headed. This slide away from a more negative outlook is, in itself, removing a major headwind.<\/p>\n\n\n\n

\u201cYou’re starting to see people thinking a little more aggressively down the road and about deploying more capital once we’re in a different interest rate environment–six, 12, 18 months from where we are now,\u201d Severino said.<\/p>\n\n\n\n

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LISTEN TO:<\/strong> CRE Sentiment at Best Level in 2 Years<\/a><\/p>\n\n\n\n

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Over that same timeline, Ronen anticipates a lot of pressure on debt funds and distressed assets. The highly discussed wave of approaching maturities is going to continue to apply this pressure and ultimately lead to more transactions.<\/p>\n\n\n\n

\u201cOnce we see that transaction volume pick up, we’re going to get a market clearing price and cap rates for multifamily, and all the other asset classes, that will then help spur other investment,\u201d Ronen reasoned. That’s the big question right now: Where are cap rates on these assets?<\/p>\n\n\n\n

A recent Cushman & Wakefield report showed that about 50 percent of the distress pipeline is in office, Reuter noted. While this is potentially unsurprising, there is a silver lining.<\/p>\n\n\n\n

\u201cThe rate of growth was slowest for distress that it\u2019s been in two years,\u201d Reuter mentioned. \u201cThat\u2019s a positive indicator.\u201d<\/p>\n\n\n\n

When it comes to distress, Levy said, it is important to consider the one caused by higher rates and the refinancing gap.  <\/p>\n\n\n\n

\u201cWhether we believe the forward curve or not, as rates begin to pull in, that refinance gap lessens,\u201d Levy continued. As more deals come to market, it will be interesting to see which are distressed and which are related to smoother market dynamics.<\/p>\n","protected":false},"excerpt":{"rendered":"

CPE Voices panelists shared insights on all things 2025, including lending dynamics, shifting sentiment and where to find opportunity.<\/p>\n","protected":false},"author":3006,"featured_media":1004737381,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21755,21782,21808,21748,21783,21752,23891,21747,21749,51037,21797],"tags":[52263,34908,48911,33722,33429],"class_list":["post-1004737379","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-data-centers","category-development","category-featured","category-industrial","category-investment","category-mixed-use","category-national","category-office","category-retail","category-trends","category-webinars","tag-bgo","tag-cushman-wakefeld","tag-dekel-capital","tag-lasalle-investment-management","tag-pearlmark-real-estate-partners"],"acf":[],"yoast_head":"\n2025 CRE Outlook: The Year Ahead - 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