Real Estate Pulse - Q2 2025
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A Cycle Upturn Meets Uncertainties
US commercial real estate (CRE) investment performance during the first quarter of 2025 confirmed expectations for a cycle turnaround. The NCREIF National Property Index (NPI) benchmark delivered its third consecutive quarter of positive total return, following seven quarters of negatives. Three positive quarters are a solid basis for declaring a cycle upturn supported by steady economic growth through year-end 2024 and ongoing employment growth. While diminishing new supply this year should support the CRE cycle upturn from here, prospects for the quarters ahead have become highly unpredictable amid near-term macroeconomic uncertainty.
Additional highlights
- Investors who can overlook near-term macroeconomic uncertainty may find an attractive opportunity in CRE.
- A weakening in expected US economic growth accompanied by higher expected inflation will challenge Federal Reserve policymakers in 2025.
- During the first quarter of 2025, the pace of CRE transactions held up well, property pricing increased and credit availability was robust.
- Upturns in net operating income growth and stabilizing cap rates contributed to positive appreciation in most sectors.
- The top 50 metro area markets are reporting stable to improving market fundamentals, which we believe should further benefit as inflows of new supply diminish.
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