Real Estate Pulse - Q3 2025
A Reaffirmed Cycle Upturn – For Now
US commercial real estate (CRE) investment performance during the second quarter of 2025 showed no sign of the turmoil accompanying President Trump’s policy directives. The CRE benchmark, the NCREIF National Property Index (NPI), posted positive total return for the quarter roughly in line with first-quarter results. The data, however, are backward looking, and there could be policy impact ahead.
Key takeaways
- While second-quarter US CRE data reaffirmed the cycle upturn, support from solid economic growth over the quarters ahead remains in jeopardy amid tariff turmoil and faltering employment growth.
- Expectations for rising asset values in the year ahead improved sharply from the second to third quarter, and second-quarter property transactions were 7% higher in dollar volume versus the year-earlier total, supporting 2025's cycle-bottom designation.
- Momentum in vacancy rates and rent growth across the 50 largest metro areas remained positive in the second quarter. Only the industrial sector showed a notable increase in vacancy rates and weaker rent growth.
- Macroeconomic uncertainty along with historically high and unsettled import tariffs cloud the outlook for both net operating income growth and capital appreciation, but the lag in commercial real estate's response to the macroeconomy may be helpful.
- For investors, the current uncertainty may prolong the opportunity for acquisitions at cycle low pricing but only if the uncertainty is tolerable.
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