- Lenders are cautious, with 95% of CRE professionals saying debt is hard to access from banks, debt funds, and investment firms.
- Deal activity is slowing, with single-asset property sales down 8% year-over-year and total deal volume down 12%.
- Large investors are stepping back, as REITs sell assets and banks limit lending due to risk concerns.
- Some see opportunity, as fewer buyers mean better deals for investors with cash and strong plans.
According to GlobeSt, at midyear 2025, US commercial real estate is facing tighter funding and slower deal flow. A new report from Cozen O’Connor shows many industry leaders are worried. Early optimism from January has faded. Higher borrowing costs and limited access to capital are slowing activity.
Tighter Debt Markets
The Federal Reserve stopped raising rates earlier this year. Still, borrowing remains expensive. Banks and lenders are more strict. They now look closely at borrowers’ finances and property cash flows. Most loans now come with lower leverage—usually 60–65% loan-to-cost ratios. High-leverage deals are rare.
Private debt funds are still active. But even they are asking for better terms and higher returns to cover risk.
A big concern: refinancing. About 20% of the $4.8 trillion in CRE loans come due this year. Many owners may not qualify for new loans. Only those with strong balance sheets and clear business plans are getting approved.
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Fewer Deals, But Some Activity
Investors started 2025 strong. Over $57B was raised in Q1. But political and trade uncertainty soon slowed markets. Property values wobbled. Buyers stepped back. Deal volume is still above late 2024 levels but is now falling again.
Some REITs are selling assets. This reduces competition and opens doors for others. Buyers with cash and a long-term view are stepping in.
Where Opportunity Remains
Despite challenges, there are openings. Lower buyer demand has led to better pricing. Some investors are finding deals in niche property types and top-tier locations.
Private equity groups and large funds are still active—if the deal fits their strategy. They are betting on value where prices have adjusted.
Looking Ahead
The market is cautious. Every rate move and policy shift affects investor plans. Most are waiting for lower borrowing costs and a more stable outlook.
Until then, deals will be limited to buyers with strong backing. Lenders will stay selective. And capital will go only to projects that show real value.
