Industry News

The commercial real estate (CRE) market is navigating significant shifts as we approach the end of 2024, with emerging trends and evolving sector dynamics in various regions and asset classes. Key updates include:

1. Bank Lending Anticipation: Banks have largely held back on CRE lending due to recent high-interest rates, but this may change in 2025. J.P. Morgan and other major banks anticipate a return to balance sheet lending, particularly in multifamily properties, though office sector financing remains cautious given ongoing demand uncertainties. If interest rates continue to decrease as projected, bank lending may rebound, but stringent lending standards may still apply in the near term for sectors facing challenges, like office spaces and distressed properties.

2. Sector-Specific Recovery: The CRE market, valued at nearly $27 trillion, has shown robust performance in specific areas, notably multifamily and office spaces, which led growth in Q3 2024. Multifamily properties are also experiencing rising delinquencies, especially in loans serviced by Freddie Mac and Fannie Mae. Meanwhile, industrial real estate remains strong, particularly in port and logistics hubs, where infrastructure investments continue to drive demand.

3. Office Conversions: Office buildings in cities like Los Angeles are being converted to residential units due to persistent low occupancy rates. For example, a significant office building in LA’s Koreatown is set to become 230 apartments, reflecting a broader trend in adaptive reuse of underutilized office space across urban markets.

These factors reflect a cautious but optimistic outlook as CRE stakeholders adapt to both long-standing and emerging trends across asset classes.

The commercial real estate (CRE) financing outlook for 2025 is cautiously optimistic amid challenges and evolving trends. As we approach 2025, higher interest rates and substantial CRE debt maturing (about $1.9 trillion by 2026) are expected to create headwinds for refinancing.
Despite this, some improvements are anticipated, particularly if the Federal Reserve continues to lower rates. Lower interest rates could help ease debt obligations, freeing up banks to lend more, which may result in a gradual increase in deal flow and capital availability for CRE pro.

Sector-specific forecasts highlight continued resilience in retail, industrial, and affordable housing markets, driven by steady demand and reshoring of manufacturing. Multifamily properties, while facing high supply, remain a strong investment due to sustained demand. The office sector, still affected by high vacancy rates, might see some recovery as companies reevaluate their space needs and adapt to hybrid work models.

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Sustainability and technology adoption are also becoming critical in CRE. With new pressures for net-zero buildings, many firms plan significant retrofits and energy-efficient upgrades. Smart building technologies are likely to play a bigger role, helping CRE firms achieve sustainability goals while also attracting tenants through enhanced, flexible spaces.

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Overall, 2025 is expected to bring gradual recovery in CRE financing as market adjustments, policy shifts, and investment in sustainable practices reshape the industry. For more on these trends, subscribe to our newsletter.