CRE Market Recovery Hinges on Borrower-Lender Cooperation

February saw a 30% YoY jump in CRE sales and a second consecutive month of declining CMBS loan distress, indicating that the market may be entering a stabilization phase.

Jordan B.
April 11, 2025

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Good morning. The CRE market is showing early signs of recovery, with deal volume ticking up and distress easing—but it’s far from smooth sailing. A new Moody’s report says lender-borrower cooperation will be critical to keeping the rebound on track.

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Market Snapshot

S&P 500

GSPC

5,268.05

Pct Chg:
-3.46%

FTSE NAREIT

FNER

711.09

Pct Chg:
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10Y Treasury

TNX

4.407%

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+0.015

SOFR

30-DAY AVERAGE

4.32%

Pct Chg:
-0.00

*Data as of 04/10/2024 market close.

CAUTIOUS COMEBACK

CRE’s Comeback? Only If Borrowers and Lenders Get on the Same Page

A recent Moody’s report shows signs of life in the CRE market, but cooperation and resilience are key to sustaining momentum.

Thawing market: February saw a 30% YoY jump in CRE sales and a second consecutive month of declining CMBS loan distress, indicating that the market may be entering a stabilization phase. Moody’s attributes this shift to a mix of factors: cooling interest rates, more confident investors, improved economic signals, and some long-awaited price discovery as losses get realized.

Mixed signals: CRE equity values fell—down 6.2% globally and 10.1% in pension funds—yet lending activity surged. Loans jumped 19% overall and 25% in pensions, while mortgage balances inched up. The split highlights a market still in flux, with cautious players and few distressed deals moving.

Big deals dominate: The rebound in activity is largely driven by major deals—especially in office, distressed, and top-tier assets. Smaller transactions, however, continue to lag, weighed down by market uncertainty and tighter lender sentiment. Moody’s warns of a standoff: until valuations align, expect limited transactional flow from smaller investors.

Filling the gap: As traditional banks pull back, private lenders have stepped in, making up 40% of the CRE financing market in 2024. This growing reliance on non-bank capital is reshaping how deals get done and who gets them done.

➥ THE TAKEAWAY

Bumpy road ahead: Moody’s forecasts gradual improvement through early 2026—but warns the path forward will be bumpy. Key risks include Treasury yield fluctuations and murky Fed policy. Both borrowers and lenders will need to remain flexible, with “just staying in the mix” seen as a win for now.

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✍️ Editor’s Picks

At Crossroads: The 2025 Real Estate Symposium at Harvard returns on April 26 with powerhouse speakers from Blackstone, Hines, and more. Claim your 10% exclusive CRE Daily discount today! (sponsored)
Uncertain outlook: A 90-day pause on US tariff hikes brings brief relief, but lingering uncertainty continues to cloud CRE, with potential upsides for multifamily investors.
Stadium transformation: Rams owner Stan Kroenke is planning a $10B, decade-long redevelopment of Warner Center in LA, featuring a new team HQ and a sweeping mixed-use district.
Valuation gap: Some private appraisals for industrial and apartment properties continue to defy market logic, with cap rates hovering at or below the 10-year Treasury yield.
Regulatory shift: Treasury Secretary Scott Bessent announced plans for a more hands-on Treasury role in banking regulation, aiming to better align lending rules with actual financial risk.
Loan default: Crestlight Capital is headed to foreclosure on a $114M Atlanta office and retail portfolio after defaulting on an $84M loan.

🏘️ MULTIFAMILY

Supply peak: After years of record-breaking apartment construction, Q1 2025 signals the beginning of a slowdown, with deliveries dipping slightly and future supply expected to taper off through the rest of the decade.
Luxury revival: Terra and Fortune International Group have acquired a 3.8-acre oceanfront site on Key Biscayne for $205M, marking the island’s first new condo development in over a decade.
Back on top: Greystar has tightened its grip on the multifamily sector, nearing 1M units under management and reclaiming the top spot on NMHC's annual rankings.
Skyline statement: A 70-story residential tower rising in Manhattan's Garment District has secured $275M in financing, as it aims to reshape Midtown’s skyline and housing mix.
Burn victims: Apartment rents in LA and Ventura counties jumped 2.4% last quarter—five times faster than a year ago—as demand surged in areas impacted by January’s massive wildfires.

🏭 Industrial

Doubling down: Blackstone has acquired a 25-property industrial portfolio in Texas from Crow Holdings for $718M, expanding its US warehouse footprint amid rising demand and limited new supply.
Industrial compression: Industrial cap rates continue to decline, with investor demand staying strong and interest rate normalization supporting pricing, especially for Class A assets in growth markets.
Spec bet: Lincoln Property Co. and One Investment Management have secured $74.2M in financing to build a speculative four-building industrial project in Boise.
Capital infusion: DRA Advisors has invested $107.5M to recap a 900 KSF Florida industrial portfolio, strengthening its foothold in a low-vacancy, high-demand market.

🏬 RETAIL

Pricing pressure: Amazon CEO Andy Jassy warned that third-party sellers will likely pass new tariff costs on to consumers as the company braces for price shifts.
Cashflow crunch: Brookfield Property Partners has defaulted on a $260M CMBS loan tied to Pembroke Lakes Mall in South Florida, with the debt now in special servicing.
Bay buy: Sterling has acquired the Rossmoor Shopping Center in Walnut Creek, CA, for $61M, more than doubling the property’s 2012 sale price.

🏢 OFFICE

Leasing pivot: Google is looking to sublease 413 KSF across three buildings at its Pacific Shores campus in Redwood City, signaling further retreat from office space.
Downtown deal: Arup has signed a nearly 100 KSF lease at 140 Broadway, relocating from 77 Water Street as that building heads for residential conversion—marking a win for Manhattan’s rebounding office market.
Tenant turnaround: The GSA has rescinded its plan to terminate a 135 KSF IRS lease in suburban Nashville, keeping Global Net Lease’s $4.6M/yr office deal intact.
Flagship move: City National Bank of Florida has signed a record 145 KSF lease in Coral Gables, the largest office deal in South Florida in over two years.

🏨 HOSPITALITY

Eviction spiral: LuxUrban has been evicted from two Manhattan hotels amid mounting lawsuits, unpaid rent, and ongoing leadership turmoil.
Wynn win: Related Companies and Wynn Resorts moved closer to building a $12B casino at Hudson Yards after gaining key support from NYC’s Planning Commission for site modifications.

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📈 CHART OF THE DAY

Office REIT valuations have dropped sharply, trading at a 27.3% median discount to NAV as of March—down from 14.6% in November—amid uncertainty over Fed rate cuts.