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Fed Cuts Rates as CRE Awaits Real Impact
The Fed’s first rate cut in 2025 offers relief, but CRE impact may take time to materialize.
Jordan B.
September 18, 2025
Together with
Good morning. The Fed’s long-expected rate cut is here, offering some relief to capital-constrained CRE markets. While it's a step in the right direction, it’s unlikely to spark a major turnaround without further easing.
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Market Snapshot
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RATE CUT
Fed Finally Cuts Rates — CRE Watches for the Next Move
The Fed finally made its move, and while the 25 bps cut won’t change the game overnight, CRE sees it as a welcome shift.
What happened: The Fed reduced its benchmark interest rate by 25 basis points to a range of 4.00–4.25%, ending a streak of five straight pauses. More importantly for markets, the Fed’s updated "dot plot" projects two more cuts this year, with a longer-term target of 3.1% by the end of 2027—down from a 3.4% projection in June.
Zoom in: The median forecast from Fed officials places the year-end fed funds rate at 3.6%, with projections ranging from 2.9% to 4.4%. Following the announcement, prediction market Kalshi saw the odds of three total cuts this year jump to 67%, up from 48% the day before.
Source: Kalshi
Relief, not rebound: For commercial real estate, the rate cut signals a positive shift—easing pressure on underwriting, aiding refinancing, and helping revive stalled deals. But one cut won’t move valuations overnight; its real impact lies in boosting confidence and signaling a more supportive rate environment.
Thawing, slowly: High interest rates have suppressed transaction volume and new development activity across the board. With this initial cut—and more potentially on the way—short-term borrowers could see some relief, and developers may regain the confidence to revisit paused projects.
Sector outlook:
Industrial: Demand shrank in Q2 for the first time since 2010. Lower rates and tariff clarity could support a turnaround by early 2026.
Multifamily: With development starts down over 35% year-over-year, lower financing costs could help push new supply forward, but fundamentals like rent growth are still key.
Office: Stabilization, not recovery, is the current goal. Lower rates may help with refinancing, but structural challenges remain.
➥ THE TAKEAWAY
Not a turning point—yet: This rate cut won't single-handedly rescue CRE, but it's a start. More importantly, it signals a Fed that’s shifting from “higher for longer” to “watchful and willing.” For CRE, that opens the door for dealmaking to pick up and valuations to stabilize, especially if more easing follows.
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✍️ Editor’s Picks
Best in proptech: InvestNext named “Investment Management Platform of the Year” in the 5th annual PropTech Breakthrough Awards program. (sponsored)
Distress discount: Rithm Capital is acquiring beleaguered office REIT Paramount Group for $1.6B, betting on a discounted recovery play in Manhattan and San Francisco's struggling office markets.
Lender confidence: Brookfield is finalizing a $1.25B refinancing for its fully leased Five Manhattan West office tower, signaling renewed lender confidence in top-tier Manhattan assets.
Agency access: J.P. Morgan has secured a Freddie Mac license to underwrite affordable housing loans, expanding its already dominant multifamily lending platform.
New launch: Deal Manager AI launched to give small real estate teams enterprise-style tools like AI-assisted underwriting, live Excel syncing, and automated LOIs.
Borrower leverage: Private lenders are reshaping CRE deal terms, offering more flexibility but demanding stronger sponsors and smarter structures.
Creative conversions: Award-winning projects in Philly, Chicago, and Memphis gave new life to old buildings through adaptive reuse.
Score slide: FICO scores fall as consumers prioritize auto loans over student debt, with Gen Z most affected.
🏘️ MULTIFAMILY
Steady climb: Multifamily rents ticked up in 70% of U.S. markets in August, with steady national growth and standout gains in cities like Wichita, Augusta, and Chicago.
Tertiary drift: Affordable Rust Belt and Northeast cities like Augusta, Syracuse, and Youngstown are poised to lead U.S. multifamily rent growth through 2030.
Policy push: A bipartisan House bill aims to unify federal agencies to tackle housing affordability, with a focus on data-sharing, cost reduction, and coordinated solutions.
Split development: Multifamily permitting saw modest national growth in July, while single-family housing continued its months-long slowdown.
Lifestyle tradeoffs: With asking rents falling for the 25th straight month, more tenants are shopping for better deals or more space, especially in markets like Atlanta and Las Vegas.
Density push: California's SB 79 aims to boost affordable housing by overriding local zoning to allow denser multifamily development near major transit hubs.
🏭 Industrial
Quantum leap: OQC and Digital Realty opened NYC’s first quantum-AI data centre, merging quantum computing with Nvidia-powered AI.
EV gamble: Rivian is moving ahead with its long-delayed $5B Georgia plant despite looming EV sales declines, with construction set to start in 2026.
Storage steadies: After a turbulent stretch, the self-storage sector is stabilizing with rent growth ticking back up, supply moderating, and demand showing resilience.
Zoning clash: Pennsylvania’s data center boom is sparking battles between state leaders pushing fast-tracks and towns fighting for local control.
Another acquisition: BKM and Kayne Anderson bought a 40-building, 889K SF Phoenix industrial portfolio for $168M.
🏬 RETAIL
Spending streak: US retail sales rose 0.6% in August, marking a third straight monthly gain and signaling resilient summer consumer demand.
Retail buy: Stockbridge Capital bought the fully leased, Whole Foods–anchored Uptown Boca retail center in Boca Raton for $118M.
Confidence dip: US consumer sentiment fell for a second month in September, as rising inflation and job market worries left households uneasy about spending.
🏢 OFFICE
Private capital: L.A.'s struggling office market is opening doors for private capital, as long-term, risk-tolerant investors find value amid falling prices and financing hurdles.
AI anchor: ServiceNow will lease 200K SF in West Palm Beach for a new HQ and AI hub, marking a major step in the city’s rise as a tech center.
Lab lull: Life sciences leasing remains sluggish amid record vacancies and limited demand, with recovery unlikely before 2028.
Instant offices: AI firms’ demand for ready-to-use “plug-and-play” offices is driving sharp drops in availability across key San Francisco submarkets.
🏨 HOSPITALITY
Casino rejected: Caesars and SL Green’s bid for a Times Square casino was rejected by a local committee vote, derailing one of Manhattan’s most high-profile gaming proposals.
Revenue strain: Hoteliers face soft demand, rising costs, and forecasting challenges, responding with pricing discipline, AI tools, and global market shifts.
A MESSAGE FROM AIRGARAGE
How BPG Unlocked 30% More Revenue
The Problem: Buccini Pollin Group was losing money to outdated tech, messy accounting, and unpaid parking invoices.
The Switch: They partnered with AirGarage to modernize operations and streamline revenue collection across their portfolio.
The Result: NOI increased by 30%, driven by improved billing accuracy, better pricing, and more consistent enforcement.
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📈 CHART OF THE DAY
West Coast multifamily construction has plunged to its lowest level since 2011, with just 20,000 new units started in the past year across major markets like Los Angeles, Seattle, and San Diego.
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