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Financing Returns to CRE as Investors Eye a Rare Opportunity

Financing Returns to CRE as Investors Eye a Rare Opportunity

As commercial real estate enters 2025, analysts see a unique buying window for investors.

Jordan B. & Han-Gwon Lung
December 13, 2024

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Good morning. 2025 could be a new dawn for commercial real estate as financing returns and valuations hit historic lows, creating what experts call the best buying opportunity in decades.

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Market Snapshot

S&P 500

GSPC

6,051.25

Pct Chg:
-0.54%

FTSE NAREIT

FNER

803.17

Pct Chg:
-0.34%

10Y Treasury

TNX

4.342%

Pct Chg:
+0.018

SOFR

30-DAY AVERAGE

4.608

Pct Chg:
0.0%

*Data as of 12/12/2024 market close.

MARKET OUTLOOK

Why 2025 Could Be a Turning Point for Commercial Real Estate

Financing is returning to commercial real estate ahead of 2025, marking what some say could be the best entry point for investors in nearly two decades.

Lending is back: The $22.5 trillion commercial real estate market, which faced a financing drought after the pandemic, saw loan volumes rise to $539 billion in 2024—a 26% year-over-year increase, according to the Mortgage Bankers Association. Debt funds and alternative lenders are filling gaps left by traditional banks, but most deals are short-term, reflecting high borrowing costs and ongoing valuation uncertainty.

Case in point: In October, Rockefeller Center landed a record-breaking $3.5B, five-year loan led by Bank of America and Wells Fargo. Similarly, the Fontainebleau Miami Beach hotel recently closed a $1.2B refinancing deal, pushing 2024 hospitality CMBS activity to over $24 billion—the highest since the Great Recession. These landmark transactions highlight lender appetite for premium properties while avoiding long-term commitments.

Offices still under pressure: Despite positive financing trends, offices continue to face challenges. Property values for older buildings in CBDs have plummeted 50.7% from 2021, according to MSCI. High vacancy rates and the shift to hybrid have left many office landlords struggling. By contrast, trophy office properties are strong, commanding rents above $100 PSF nationwide and as high as $247 in top-tier markets.

Don’t forget the debt wall: The industry faces a looming wave of debt maturities, with $1 trillion in commercial real estate loans set to mature by 2026. Higher interest rates are compounding the challenge; average borrowing costs rose from 3.5% in 2021 to 6.74% in 2024. With property values down and long-term financing scarce, landlords increasingly rely on short-term loans to bridge the gap and maintain liquidity.

➥ THE TAKEAWAY

Getting off the sidelines: With yields at decade highs and inflation-adjusted prices at historic lows, Michael Acton of AEW calls this the best entry point in 15–20 years. Blackstone’s Nadeem Meghji agrees, saying that uncertainty—or the “fog of war”—often creates the best investment opportunities. When sentiment is negative and recovery isn’t obvious—it is the time to deploy capital.

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✍️ Editor’s Picks

Fast-track ambitions: President-elect Trump promises expedited approvals for $1B+ projects, but legal hurdles, including NEPA reviews, could complicate implementation.
Optimism builds: Construction confidence rose in November, fueled by expectations for improved sales, profit margins, and staffing, despite backlogs holding steady at 8.4 months.
Mortgage momentum: Mortgage applications rose 5.4% last week, fueled by falling rates and a surge in refinancing, which accounted for nearly half of total applications.
Junk bonds pivot: US junk-bond sales are dominated by refinancing, with private credit and leveraged loans growing as more flexible alternatives amid shrinking public high-yield debt markets.

🏘️ MULTIFAMILY

Rent surge: Manhattan’s median rent hit $4.2K in November as high mortgage rates sidelined buyers, driving rental demand and new lease signings across NYC boroughs.
Bullish multifamily: Rising rents, tight supply, and strong demand are set to drive a multifamily market rebound in 2025, despite ongoing financing challenges and affordability concerns.
Multifamily momentum: Strong demand, limited supply, and rising rents signal a bullish outlook for the multifamily market in 2025, despite financing and affordability challenges.
New playbook: Scott Turner’s nomination as HUD Secretary under Trump signals a shift toward deregulation, opportunity zone expansion, and community revitalization.
Beach deal: JSB Capital acquired the 197-unit Stellar at Emerald Hills in Dania Beach for $69M, reflecting South Florida’s year-end surge in multifamily transactions.
Shore life: Stillman Development secured $250M in financing for the Atlantic Club in Long Branch, giving the 130-unit oceanfront condo project with record-breaking pre-sales the green light.
Queens progress: Watermark Capital secured a $70M loan to complete its 26-story, 184-unit multifamily project in Long Island City, with 70% of units designated as affordable.

🏭 Industrial

Online demand: E-commerce growth and robust port activity are sustaining demand for industrial spaces, though rising vacancies, shorter leases, and steep renewal rents reflect a softening market.
Data pivot: Prologis (PLD) sold a Chicago-area data center development to HMC Capital while advancing its $7B to $8B push into the sector, leveraging its vast portfolio for quality conversions.
Amazon expands: Amazon (AMZN) purchased 195 acres in Hesperia for $162M to develop at least 2.5 MSF of warehouses, signaling a renewed push into large-scale logistics amid CA deals.
Chicagoland moves: Stag Industrial acquired a 5-building, 726 KSF portfolio in DuPage and Will counties for $74M, while CBRE Investment Management retained its largest asset in the area.

🏬 RETAIL

Macy’s windfall: Macy’s (M) expects $275M from real estate sales in FY 2024, doubling earlier predictions, as store closures accelerate amid favorable market conditions.
Tanger expands: Tanger Outlets acquired The Promenade at Chenal in Little Rock for $73M, marking its second open-air lifestyle center as it broadens its retail portfolio beyond traditional outlet malls.
Design District delights: Miami's Design District retail rents surged 67% in 2024, leading the Americas in growth and hitting $500 PSF, while the US outpaced global regions in retail rent hikes.

🏢 OFFICE

Office turmoil: Moody’s projects rising delinquencies, elevated vacancies, and declining rents in the US office market through 2025, with competitive amenities and shorter commutes.
O’Hare lease: The Chicago Department of Aviation secured nearly 100 KSF at US Cellular Plaza to support the $8.5B O’Hare 21 modernization, bolstering the resilient O’Hare office submarket.

🏨 HOSPITALITY

Beach revival: The iconic Delano Miami Beach will reopen in late 2025 following a major renovation, reestablishing its flagship status as Cain International and Ennismore expand the brand globally.
Auction block: The Line DC Hotel will be auctioned in January following financial struggles tied to "overimprovement" and branding-focused partnerships.

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