PERE Deals
By David Westenhaver
January 24, 2025
CBRE’s 2025 US Investor Intentions Survey is putting an optimistic spin on the coming year.
The commercial real estate industry is poised for a pick-up in deals in 2025, if CBRE’s 2025 US Investor Intensions Survey is any indicator.
Seventy percent of commercial real estate investors say they plan to acquire more assets in 2025 compared with last year, the survey found. But, challenges remain, with some investors expecting that volatile interest rates will continue to suppress transaction activity.
The Dallas-based advisory firm’s report indicates a sense that a positive shift is imminent, if not already underway. Three-quarters of respondents said they expect their investment activity to accelerate in the first half of the year, while more than half said they are “already experiencing recovery.”
There are a few reasons behind the shift, including a narrowing bid-ask spread between buyers and sellers. Investors are drawn to what they believe is attractive pricing and strong property fundamentals, Kevin Aussef, CBRE’s Americas president of investment properties, stated in the report.
There are other reasons as well, according to investment managers active in the market.
“Pent-up demand and resetting of values will find many investors underallocated to the real estate sector and thus more likely to be active in 2025,” Nick Stein, managing director at investment manager Sentinel Real Estate, told PERE Deals in an e-mailed statement.
David Steinbach, chief investment officer at Houston-based investment manager Hines, said the firm is forecasting a strong year.
“In 2025, we anticipate a significant rebound in real estate transaction activity globally, driven by greater market clarity and increased investor confidence,” Steinbach said in an e-mailed statement.
All about the rates
As always, interest rates will play a key role in whether deal volume picks up as predicted. While there was a sense rates would decline in 2025, sentiment in now split. This is due in part to some sticky inflation and a higher-than-expected yield on the 10-year Treasury, the benchmark interest rate for commercial real estate.
“We all were hoping that we will see more Fed easing in 2025, but it doesn’t appear, at least for now, [they will make additional rate cuts],” Lisa Pendergast, president and chief executive of the CRE Finance Council, said in an interview with PERE Deals earlier this month. “The data suggests that, if anything, the Fed is concerned about the potential for rising inflation.”
For some investors, those concerns might be enough to slow the recovery in dealflow.
“As we head into 2025, we expect some capital deployment challenges to continue across the industry,” Ariel Bentata, managing partner at investment manager Accesso, told PERE Deals.
Even among the seemingly optimistic respondents to CBRE’s survey, pockets of pessimism remain.
“Interestingly, investors are more optimistic about their own prospects compared with the broader market outlook,” Aussef said in the report. He added that investors are looking “to secure a first-mover advantage” during this phase of the pricing reset.
Geographic, sector breakdowns
The survey also gauged investor preferences for geographies, sectors and investment strategies.
In the US, gateway markets and the Sun Belt will remain as favorites, with Dallas and Miami ranking as the top two cities. Atlanta, Raleigh-Durham, Austin and Phoenix all ranked high based on these metrics. Meanwhile, perhaps the biggest geographic surprise was San Francisco, which entered the top 10 preferred metros.
Multifamily will be the favorite sector for investors, with three-quarters of those surveyed saying they plan to deploy capital into that asset class. Industrial and logistics ranked second, with just over one-third targeting those assets. Retail ranked third, followed by hospitality, office, then data centers.
Value-add and core-plus strategies reign supreme, meanwhile, with two-thirds of respondents targeting one of the two categories.
McKenna Leavens contributed reporting for this story.