CRE Prices Show Modest Recovery as Market Faces New Headwinds

CRE prices are rising slowly, but stalled rate cuts and new tariffs are shifting investor focus and market dynamics.

Jordan B.
June 06, 2025

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Good morning. The Trepp Property Price Index (TPPI) ticked higher in early 2025, but new hurdles are emerging as stalled rate cuts and rising tariffs have taken center stage, reshaping investor priorities.

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Market Snapshot

S&P 500

GSPC

5,939.30

Pct Chg:
-0.53%

FTSE NAREIT

FNER

768.33

Pct Chg:
-0.11%

10Y Treasury

TNX

4.377%

Pct Chg:
-0.018

SOFR

30-DAY AVERAGE

4.34%

Pct Chg:
-0.00

*Data as of 06/04/2025 market close.

Market Watch

CRE Prices Show Modest Recovery as Market Faces New Headwinds

CRE prices ticked up slightly in Q125, but optimism is tempered by stalled rate cuts and rising tariff concerns.

A cautious climb: The Trepp Property Price Index (TPPI) posted modest gains in Q125, with the equally weighted (EW) index up 1% and value-weighted (VW) up 0.86%, though the VW index remains nearly 10% below its 2022 peak. As rate cuts stall and tariffs take center stage, investor caution is rising amid growing policy uncertainty.

Rates on ice: Despite a late-2024 rate cut, expectations for additional monetary easing have dimmed. Meanwhile, newly introduced tariffs have shifted investor attention toward trade policy and global uncertainty. The combination of high borrowing costs and growing geopolitical risk has tempered transaction volumes and made CRE pricing less predictable heading into the rest of 2025.

Sector Breakdown

Mixed multifamily: Multifamily showed mixed results: EW rose 0.47%, but VW fell 0.60%, indicating strength in lower-tier assets while high-value deals lag, especially in oversupplied Sun Belt markets facing affordability challenges.
Steady office: Office prices show signs of stabilizing, with modest year-over-year gains (1.72% EW, 0.66% VW), though VW remains 20% below 2022 highs. Return-to-office gains help, but uncertainty and cost pressures persist.
Retail shifts: Retail held steady in Q1 (EW +1.66%, VW +0.50%), as e-commerce and shifting habits weigh on mid-market assets, while luxury centers show resilience. Tariffs may upset the balance.
Industrial stays hot: Industrial leads the pack, driven by AI-fueled data center demand, with EW up nearly 6% since 2022. Still, tariff-driven supply chain shifts may spark future volatility.
Lodging cools: Lodging continues to struggle, with Q1 drops of 0.55% (EW) and a 5.95% annual decline. Softening travel demand, an oversupply in key markets, and weakened consumer confidence are all headwinds.

➥ THE TAKEAWAY

A fragile rebound: While CRE prices are trending up, the recovery remains slow and highly susceptible to external shocks. With rate relief uncertain and tariffs rising, investors are rebalancing portfolios with caution, especially in sectors like multifamily and retail, where fundamentals are diverging sharply by tier and tenant base.

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✍️ Editor’s Picks

NOI boost: Multifamily owners are boosting income by leasing empty units for furnished mid-term stays, earning up to $2K/unit each month. (sponsored)
Portfolio pivot: The Alaska Permanent Fund, managing $81 billion in assets, is looking to sell stakes in high-profile office and retail properties to shift its focus to multifamily and industrial assets.
Rent drop: Manhattan office rents fell sharply in May, led by Midtown, marking the biggest monthly decline in nearly three years.
Deals return: CRE activity is rebounding post-tariff scare, with investors regaining confidence and projects restarting.
BTR boom: Build-to-rent remains a hot sector in 2025, with growing investor interest and continued supply despite stagnant rent growth.
Cost shock: Trump’s steel and aluminum tariff hike to 50% is stalling projects, spiking costs, and deepening uncertainty across construction.
Tech is back: Manhattan’s tech leasing roared back in early 2025, with firms like OpenAI, Chime, and AlphaSense driving the sector’s strongest start since 2000.

🏘️ MULTIFAMILY

Occupancy holds: US apartment occupancy stayed strong at 95.7% in May, but rent growth slipped to 0.26% as recovery momentum slowed.
Steady gains: US multifamily rents rose $6 in May, with steady demand and signs of rebound even in high-supply Sun Belt markets.
Rapid removal: A new Illinois law allows police to remove squatters without a full eviction process.
Fair housing: A North Texas HOA and FirstService Residential face lawsuits for allegedly discriminating against Black Section 8 renters.
Sun Belt refi: TruAmerica and Oaktree secured a $225M loan to refinance a 1,324-unit multifamily portfolio across Florida and Arizona.

🏭 Industrial

Storage wars: Southern and Mountain West cities lead the $237B self-storage market, driven by population growth and strong demand.
Meta power: Meta inked a 20-year deal to buy all power from an Illinois nuclear plant, joining Big Tech’s shift to nuclear energy.
Amazon exit: Prologis is planning a 2 MSF industrial redevelopment at its Bayview site, replacing Amazon's warehouse.
Data crackdown: Atlanta is set to enforce some of the nation's toughest data center regulations, requiring special permits and environmental reviews.
Warehouse refi: Bridge Industrial landed a $77.6M loan from State Farm for its fully leased warehouse complex near Miami-Opa locka Airport.
Foot on the gas: AI-driven data centers in Texas are ditching renewable energy promises in favor of private, on-site gas power plants.

🏬 RETAIL

Stable returns: Private investors are pouring into retail real estate, favoring stable, income-generating assets like net lease and necessity-based centers.
Mixed momentum: Outdated malls across Greater Philadelphia are being transformed into vibrant mixed-use developments
Turnaround plan: CBL Properties is selling non-core malls to pay down debt and reinvest in upgrades, as the REIT aims for a turnaround.
Cashier comeback: Dollar General’s removal of most self-checkout boosted margins in Q1, with lower shrink and higher markups helping offset traffic dips.
Vacant value: Retail landlords in Manhattan’s Meatpacking District are holding nearly $41M worth of empty space, with 18% of storefronts unleased.

🏢 OFFICE

Leasing surge: Major office landlords like Piedmont and Highwoods are reporting their strongest leasing activity since 2019.
Steep discount: Brookfield sold a DTLA office tower for $210M, 42% below its 2005 purchase price.
Downsizing: Top brokerages trimmed or froze office footprints in 2024, even as deal volume climbed by $32B.
Adaptive reuse: A vacant River North office building is being converted into 153 apartments, reflecting a national surge in office-to-resi redevelopments.
Fiscal fallout: Boston’s office slump could slash building values by 45% and cost the city $1.7B in lost tax revenue by 2029.
Slam dunk: The Big East Conference is moving its headquarters to 7,882 SF in the Empire State Building.

🏨 HOSPITALITY

For sale: Park Hotels & Resorts has listed the 505-room DoubleTree San Jose for sale as Bay Area hotel distress deepens.
Sudden enforcement: Miami-Dade is aggressively enforcing a long-overlooked 1% sales tax on restaurants, blindsiding over 800 operators with retroactive bills.

📈 CHART OF THE DAY

Telecomm leads all US REIT sectors YTD with a 15.7% total return, followed by health care at 9.5% and diversified at 8.2%. Despite lagging in May, these sectors remain the top performers for the year.