CRE Deal Activity Hits 12-Month Low in March as Investors Shift to 'Wait-and-See' Mode

Deal activity fell 3.9% in March 2025, the slowest in nearly a year, with all sectors but industrial and hotel seeing declines.

Jordan B.
May 26, 2025

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Market Snapshot

S&P 500

GSPC

5,802.82

Pct Chg:
-0.67%

FTSE NAREIT

FNER

750.11

Pct Chg:
+0.56%

10Y Treasury

TNX

4.509%

Pct Chg:
-0.044

SOFR

30-DAY AVERAGE

4.34%

Pct Chg:
-0.00

*Data as of 05/23/2025 market close.

Deal Slowdown

CRE Deal Activity Hits 12-Month Low in March as Investors Shift to 'Wait-and-See' Mode

CRE transaction activity slowed notably in March, recording its lowest monthly volume in nearly a year, though select market indicators point to early signs of stabilization.

By the numbers: Deal activity fell 3.9% in March 2025, the slowest in nearly a year, with all sectors but industrial and hotel seeing declines as reported by SitusAMC. Retail led the drop (-40%), followed by office (-11.4%) and apartments (-9.6%), though apartments still topped in volume at $9.2B. Industrial bucked the trend, rising 25.7%.

Holding pattern: Amid policy uncertainty, investors pulled back in Q1, with 70% recommending "hold"—up 14 points—while "buy" fell to 23%. Just 7% favored selling. Apartments stood out as the only sector with more buy than hold recommendations, driven by demand for stable cash flow.

Subtle signs of life: Despite slower deal flow, CRE returns rose 40 bps in Q1 to a near three-year high, with one-year returns at 2.7%. Retail led at 1.8%, while apartments and industrial each posted 1.3%. Office returns turned positive but remain negative YoY. Construction across all sectors hit multi-year lows, potentially boosting future rent growth.

CRE appeal: Tariff-driven market turmoil revived CRE’s attractiveness, with investor preference rising post-April 2 as stocks lost favor. Once dimmed in late 2024, CRE is regaining its status as a safe haven alongside cash and bonds.

Silver linings: Despite ongoing market volatility and inflation pressures, CRE originations jumped 42% YoY in Q1, driven by a 205% surge in office lending. Narrowing yield spreads and rising property prices—up for five straight quarters—suggest a potential pricing floor.

➥ THE TAKEAWAY

Cautious optimism: While political and economic uncertainty are keeping CRE investors on the sidelines, a market trough may be in the rearview, as fresh capital eyes a reawakening across commercial real estate.

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✍️ Editor’s Picks

Macro pressure: Despite tariff-induced uncertainty and rising costs, CRE is showing resilience with solid industrial and office leasing, even as consumer confidence wanes.
Permit premiums: Developers are flocking to shovel-ready sites—especially in Miami—to save time and money as construction costs rise and tariffs tighten budgets.
Bumpy road: Tariffs and global uncertainty have disrupted CRE’s early 2025 rebound, slowing deal activity and cooling investor sentiment.
REIT rally: Publicly traded multifamily REITs outperformed expectations in Q1 2025, with strong demand, improved fundamentals, and renewed investment momentum
Tax turnaround: San Francisco’s transfer tax revenue is rising for the first time in four years, driven by a modest rebound in big-ticket property sales.
CLO craze: Greystone’s $900M deal adds fuel to a booming 2025 trend, as CRE-backed CLO issuances surge 374% YoY.

🏘️ MULTIFAMILY

Pinnacle collapse: Major NYC landlord put thousands of apartment units into bankruptcy after facing foreclosure, with assets tied to the filings totaling up to $1B.
Zoning reform: Texas advances a bill letting multifamily and mixed-use projects bypass rezoning to ease its housing shortage.
DTLA rebounds: Downtown LA’s multifamily occupancy has surpassed pre-pandemic levels, hitting 90.8% in Q125 as demand climbs.
Gold Coast living: The 304-unit One East Delaware apartment tower in Chicago is up for sale, testing renewed investor interest as the city’s multifamily market shows early signs of a rebound.
Loan guarantee: California lawmakers advance SB 750, a bill proposing state-backed insurance for multifamily loans to lower financing costs.

🏭 Industrial

Growth stall: Despite headline-grabbing expansion plans, US manufacturing revenue is projected to stay flat in 2025 as tariffs, rising costs, and economic uncertainty weigh on growth.
Supply chain strain: Colliers' Q125 report highlights falling freight rates, tariff-driven trade volatility, and rising demand for bonded warehouses, as US supply chains face headwinds.
Data center deal: JP Morgan Chase is leading $7.1B in construction financing for a massive Oracle-leased AI data center in Abilene, Texas, one of the largest such loans to date.

🏬 RETAIL

Consumer split: Leaders across sectors report stable spending on cars, homes, and travel, despite record-low consumer sentiment and growing caution around inflation and tariffs.
Texas prohibition: Texas is poised to ban intoxicating hemp products statewide, threatening 8K retail outlets and billions in sales.

🏢 OFFICE

Trophy office: Manhattan’s trophy office market remains resilient amid rising build-out costs and supply chain headaches from new tariffs.
Government sell-off: The US Public Buildings Reform Board is pushing to offload 7M SF of federal properties, including several trophy buildings in DC.
City approval: Hines has cleared the final hurdle for a 13-story office tower in DTLA’s Arts District, scoring City Council approval despite a labor-backed appeal.
Green light: 5 Times Square has received approval to convert its mostly vacant tower from offices to 1,250 apartments, including 313 affordable units.
Build to impress: As companies fight to bring employees back, fit-out costs for high-end, flexible, and sustainable office spaces are rising nationwide.

🏨 HOSPITALITY

Room for risk: Despite tighter lending, higher costs, and inflationary pressure, industry insiders say hotel deals are still viable.
Labor overhead: LA’s proposed $30 minimum wage for hospitality workers by 2028 is spooking hotel owners, killing deals, and prompting fears of widespread distress ahead of the Olympics.
Racing reimagined: Formula One’s F1 Arcade is revving into Chicago’s River North, leasing the former Rock Bottom Brewery site for its high-tech racing simulator restaurant.

📈 CHART OF THE DAY

While cap rates often track interest rates over time, market expectations, risk premiums, and income growth assumptions create frequent and meaningful divergences.