On September 25, CREW Boston hosted Dianne Crocker, Research Director at Lightbox, to share insights into what has proven to be a very fluid and hard to predict 2025 market.
Dianne spent time unpacking the first half of the year and shared insights into what remains, referring often to 2025 “not following the script”.
Headwinds with the new administration, DOGE layoffs, “Liberation Day’s” launch of tariffs, news of rates staying put and the economy cooling launched the year. Many businesses opted to put best laid plans on hold. Despite chaos and uncertainty at the wheel, CRE deal making continued, liquidity spigots stayed open, corporate earnings and consumer spending stayed positive, and opportunistic investing gained steam with office assets back in the game.
Key themes playing out in 2025:
- A slowed path to lower rates was frustrating but when they finally dropped (25 bps), it helped some deals pencil and opened up opportunistic capital.
- CRE transactions rebounded
- Average prices increased 3% to levels 18% below the 2022 peak with the most severe declines in office (37%).
- The universe of buyers looked to grow with the average number of viewed agreements by interested buyers in Q2 increasing by 31% QoQ. Dianne notes that the strongest engagement was in multifamily, retail, and industrial.
- 71% of surveyed brokers and investors are likely to pursue CRE investment deals in the second half of 2025 which shows confidence but it’s a mixed bag by asset class with multifamily institutional capital coming back, industrial slow but still stable, retail recovering and office in the CBD is the place to be.
- After 2 years of decline, CRE lending is on the rise.
- Loan maturities are resolving slowly and the stage is set for a peak year in loan maturities. This may lead to significant refinancing activity by 2026. Wall of maturities is morphing into a wave of modifications.
Dianne reviewed all major asset class performance including data centers. Her stance on the market remains a “glass half full” seeing that the market’s sentiment is still high, investor and lender momentum is steady despite the headwinds. She noted that the metric to watch is employment and to look for cracks in the labor market - interest rate cuts are about labor softness and employment drives economic growth.
Dianne reminds us all to write our forecasts in pencil and to map out alternate scenarios as she looks at a near term forecast of:
- Interest Rates: another 1-2 cuts this year.
- Inflation, labor market, and consumer spending pressures remain major headwinds.
- CRE Transactions: Slow increase to 15-20% as investors shift into capital deployment mode with wide variation by segment and geography.
- Capital markets: adjusted to higher-for-longer, debt lending will continue to move incrementally higher over the next 12 months
- Asset management is back in vogue: With moderate price appreciation, attention shifts to operations.
