- CRE investment volumes are projected to rise by up to 10% in 2025, with industrial and multifamily sectors leading the way.
- Industrial, retail, multifamily, and office cap rates are expected to slip slightly in 2025 but remain above pre-2020 levels.
- Persistent fiscal deficits, high interest rates, and potential tariffs may impact the cost of capital and investor strategies.
- Class A office and multifamily properties, industrial spaces, and data centers show promise amid lower pricing.
CBRE’s latest report paints a picture of cautious optimism for 2025, with investment sales expected to grow by up to 10%, as reported by GlobeSt.
Deeper Dive
Due to strong demand fundamentals, industrial and multifamily assets are projected to remain top priorities, while retail could see continued interest if minimal tariff disruptions and strong fundamentals hold.
The report notes that multifamily may particularly benefit from ongoing affordability challenges, as high interest rates continue to steer potential buyers toward renting. Retail assets with strong fundamentals may also attract portfolio sales, providing more opportunities.
Cap Rate Trends
Cap rates, influenced by Treasury yields, GDP growth, and risk premiums, are anticipated to compress through 2025. CBRE forecasts the following changes in cap rates from their 2024 peaks:
- Industrial: -30 bps
- Retail: -24 bps
- Multifamily: -17 bps
- Office: -7 bps
Despite these declines, cap rates could stabilize at higher levels compared to the previous cycle due to persistently high interest rates. Investors are advised to monitor macro drivers, like liquidity, capital market conditions, and global demand.
Major Headwinds
While opportunities exist, CBRE cautions investors about several risks:
- Interest rates & fiscal policy: High 10-year Treasury yields, fueled by large budget deficits and fiscal policy, could raise borrowing costs and dampen new investments.
- Geopolitical & inflation risks: Trade policy, geopolitical uncertainties, and potential monetary or fiscal policy missteps could disrupt market recovery.
- Distressed sectors: Banks, particularly regional ones, may maintain limited exposure to distressed sectors like office and multifamily, making construction loans hard to secure.
Key Sectors
Despite these challenges, CBRE highlights the potential in well-positioned Class A office and multifamily properties, particularly in prime locations.
The industrial sector could benefit from shifting supply chains and strong consumer spending, while multifamily and retail assets stand to gain from stable demand and limited new supply.
Additionally, the growing interest in alternative asset classes, such as data centers, offers further investment opportunities, particularly as technological demands rise.
Looking Ahead
CBRE’s outlook for 2025 reflects a market in transition. While economic risks persist, opportunities abound for well-capitalized investors who can navigate evolving capital markets and shifting sector dynamics.
Meanwhile, fresh foreign capital inflows are expected, but the strength of the US dollar may limit international investments.
