Multifamily, Industrial Set to Lead as Fed Signals More Rate Cuts

As reported in GlobeSt, investor optimism is returning to commercial real estate as the Federal Reserve hints at rate cuts in the near future.

According to a report from Colliers, both buyers and sellers are preparing for a more active property market after a long pause caused by the central bank’s aggressive tightening cycle. 

But while falling rates could jumpstart investment, deal activity may take several quarters to recover fully.

State of The Market

Multifamily and industrial properties are expected to dominate the rebound:

• Multifamily assets remain a favorite, with investors targeting high-growth areas across the Southeast and Southwest, particularly in states like Florida and Texas. These markets benefit from strong population growth and housing demand, despite supply pressures from new developments. Coastal markets such as New York City and Los Angeles continue to attract institutional investors seeking long-term stability.
• Industrial real estate is another key focus, reflecting the sector’s growing share of the broader economy. Now accounting for 33% of the NCREIF Property Index, the industrial market has seen sustained growth over the last decade. Logistics hubs across California and Florida remain highly competitive as institutional capital drives activity on both the buy and sell sides.
• Office properties, long troubled by high vacancies, also show signs of stabilization. Limited new construction and an uptick in return-to-office trends are creating select opportunities for savvy investors willing to take calculated risks.

Emerging Trends

International investors are also showing renewed interest in U.S. CRE, despite the strength of the dollar. Pricing adjustments in American markets have made acquisitions more attractive on a PSF basis compared to other global markets. 

Cities with high barriers to entry, such as Boston, San Francisco, and Washington, D.C., are expected to benefit from this resurgence in cross-border investment.

Alternative asset classes are also gaining momentum. Data centers, driven by demand for AI and cloud computing, are seeing a surge in development, particularly in markets like Northern Virginia and Indiana. 

While life sciences properties face near-term challenges from oversupply, they remain a strong long-term bet for investors banking on demographic and technological trends.

Why It Matters

With significant capital still waiting to be deployed, investors are positioning themselves to capitalize on more favorable market conditions. Falling interest rates are expected to unlock opportunities in distressed and value-driven deals, allowing buyers to acquire properties below replacement costs. 

Multifamily and industrial properties will likely lead the recovery, but alternative assets and international investments will also play a critical role in shaping the CRE landscape in 2025 and beyond.