- CRE price discovery is improving, with sale prices now within 4–5% of appraised values, down from a 10% gap in late 2024.
- Industrial leads the recovery, with strong NOI trends and valuations holding at 95% of peak levels.
- Office and retail remain uneven, while multifamily shows long-term stability with falling vacancies and rising rent forecasts.
- Transaction volumes are still low, but narrowing valuation gaps suggest growing market confidence.
A Clearer Picture Emerges
After nearly two years of market uncertainty and stalled deal-making, commercial real estate (CRE) is showing signs of renewed clarity, reports GlobeSt. According to new data from SitusAMC, the pricing disconnect between sellers and buyers is narrowing—a key signal that the industry may be moving past its valuation gridlock. In Q1 2025, the spread between sale prices and appraised values fell from 28% to 22%, with sales prices now within 4–5% of NCREIF values.
Still Early, But Encouraging
While these figures suggest improved pricing transparency, low transaction volumes continue to limit broader conclusions. SitusAMC warned that CRE activity remains well below historical norms, indicating that price discovery is improving—but far from resolved.
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Sector-By-Sector Snapshot
- Industrial: The standout performer in CRE. Prices are holding at 95% of previous highs, and cap rates are trending favorably. Pro forma appraisal cap rates rose 3.9% quarter-over-quarter, while transaction cap rates dipped slightly. Strong NOI performance suggests the sector may have already stabilized.
- Office: The bifurcation continues. While overall cap rates hover below 6%, Class-A and Trophy properties in NYC and other key markets are seeing improved leasing momentum. Office cap rates surged past 9%, yet overall transaction volumes remain muted.
- Multifamily: Stability is the defining theme. Cap rates sit between 4.37% (transaction) and 4.75% (pro forma), with limited new construction projected to reduce vacancies to 3.5–4% by 2027. Moody’s forecasts rent growth reaching 5% annually by 2029, helping to support healthy IRRs.
- Retail: A fragmented but steady CRE performer. Grocery-anchored centers are propping up cap rates, which rose from 5% to 6.5% in the last year. NOI growth continues to provide ballast amid varying demand across subtypes.
Why It Matters
After years of deal inertia, narrowing price gaps could be a sign that commercial real estate valuations are becoming more reliable. As sellers adjust expectations and buyers find greater confidence in pricing, the market could see more meaningful deal flow in the coming quarters.
What’s Next
The industry is still waiting for sustained volume recovery, but the convergence of sale and appraised values is a strong first step. If these trends hold, 2025 may mark the start of a broader CRE rebound.
