Commercial real estate capital markets are “reawakening” after several difficult years, according to the findings of a much-anticipated recent report. This observation is in line with a general industry consensus that CRE has begun to turn the corner — albeit slowly and cautiously — in the wake of the first interest rate cuts in several years.
“The skies are finally clearing over commercial real estate markets, even if some dark clouds still linger,” the Urban Land Institute and PwC said in their 2025 Emerging Trends in Real Estate report released in October. “Industry people are more sanguine than a year ago, though also realistic. Better times are ahead, but the healing will take time.”
That is an outlook shared by David Rackman, partner with auditing, accounting and tax services firm EisnerAmper.
“Private capital markets are ready to deploy funding, and so the floodgates will open,” he said. “Coupled with the anticipation of beneficial tax changes, we hope and expect to see a tremendous amount of activity in the coming year.”
Rackman said EisnerAmper is busy performing projections and modeling for its clients in anticipation of the new year.
“In some cases, unfortunately, it’s about mitigating damage,” he said. “In other cases, there are current and anticipated opportunities, so we try to plan for optimal tax efficiency.”
He said EisnerAmper's planning includes analyzing fixed assets so that property sales result in better tax rates, seeking out estate planning opportunities in anticipation of changing fair market values and interest rates, analyzing sales and using tax methodologies to ensure dollars aren't overtaxed.
“We want to make sure our clients have the data points and resources they need to make smart and informed decisions,” Rackman said. “It means ‘busy season’ is all year long, and that’s OK.”
Many in CRE expect to see beneficial tax changes beginning in 2025, and Rackman advises people to be proactive so they are in a position to benefit.
“Communication with your extended team — accountants, brokers, attorneys, etc. — is crucial to making sure you can act swiftly, because everyone is ready to get in the game and play,” he said.
Bisnow reached out to industry leaders to get their take on CRE in 2025 — and to see whether the skies are indeed clearing, from their unique points of view. They reported that they are cautiously optimistic while also working to ensure that they and their clients are well positioned to navigate whatever lies ahead. What follows are their edited responses.
Justin Guichard, Managing Director And Co-Portfolio Manager, Oaktree Capital
Guichard said he foresees opportunities for his firm in 2025, particularly in asset classes such as multifamily.
“We are excited about our ability to lend at reset values and achieve low double-digit stabilized debt yields on investments with ample structural protections,” Guichard said. “Today’s downside-protected structures will aid in the future success and durability of the portfolio, even if volatility arises.”
As for particular asset classes, he said Oaktree Capital feels it is too early to deploy new fund capital into office buildings, “given the general fundamental weakness in the sector and skepticism that bargains abound at today’s price levels.”
Instead, the firm continues to focus its energies on multifamily, industrial, residential and certain hospitality assets for the bulk of its origination efforts. It is also evaluating opportunities in data centers and self-storage properties.
“The pullback by many other traditional real estate lenders has created an opportunity for lenders like Oaktree to generate attractive risk-adjusted returns by investing in high-quality assets at reduced values and attractive spreads with strong lender protections,” Guichard said.
Bob Knakal, Chairman And CEO, BK Real Estate Advisors
Knakal, who has predicted “the biggest sell-off in the history of New York City” in coming months, with Class-B and C office products leading the way, predicted many owners may be forced “to do things they’d rather not do.”
This could include deciding which assets are worth holding on to — and then determining how to hold on to them. He added that many owners are selling assets to raise capital for cash-in refinancings, a dynamic that he said is likely to play out over the next two to three years.
“Many NYC owners are also working on geographic diversification strategies as a way to reduce concentration risks,” Knakal said. “Reducing portfolio sizes and using capital from sales to bolster the balance of their portfolios is a strategy many owners are considering.”
Andy Cohen, Managing Director Of Development, BRP Cos.
Cohen said several factors will make 2025 a more favorable environment for CRE.
“We're observing the market stabilizing with a steady demand for units while upward pressures on operating expenses are beginning to level off,” he said. “We anticipate some relief toward the end of 2024 and into 2025.”
Looking further ahead, Cohen said BRP anticipates increased market activity, with transactions picking up in the middle of next year.
“Instead of continuing to face headwinds, we expect to see tailwinds in the somewhat near future,” Cohen said.
Michael Caracciolo, Head Of U.S. Asset Management And New York Office, Ivanhoé Cambridge
As in 2024, Caracciolo said Ivanhoé Cambridge’s outlook will continue to be “anchored by our convictions for each market and asset — paired with a pragmatic and disciplined approach in creating value through these unprecedented times.”
His firm is hopeful that capital will continue to unlock and the flow of transactions will increase in 2025.
“We are making prudent capital allocation decisions, managing resources wisely and strategically planning for future market and portfolio developments,” Caracciolo said. “We've maintained a strong position due to our diversified asset and investment base and proactive portfolio repositioning that we implemented a few years ago, all of which were supported by data-driven strategies.”
David Shechtman, Senior Executive Managing Director, Meridian Capital Group
Shechtman predicted that by 2025, more than half of sellers will be lenders and other creditors — not fee simple owners.
“Continuing to service our lender clients is a natural transition for a Meridian broker,” he said.
Ryan Boan, Head Of U.S Retail And Mixed-Use Transactions, Nuveen
Boan said Nuveen has been active in the grocery-anchored space, particularly in the Sun Belt, although it continues to evaluate opportunities in the Northeast and Midwest when it finds good relative value.
“The overall resiliency of grocery-anchored retail, combined with historically low supply, is expected to produce strong long-term performance throughout market cycles,” he said.
Jovana Rizzo, Director Of Corporate Communications, The Durst Organization
Rizzo said the Durst commercial portfolio is made up of Class-A assets whose tenants are interested in well-maintained buildings near public transit.
“Tenants are also interested in amenities and experiences,” she said. “We have opened our signature Well& by Durst amenity space in three office towers and are looking to expand to an additional building next year.”
Jared Toothman, Executive Vice President, Lincoln Property Co.
Lincoln Property manages and leases approximately 520M SF of commercial space nationally, including 10M SF in the New York Tri-State Area. Moving into 2025, the company is focused on growing its development pipeline and office portfolio, Toothman said.
He said the company expects to accomplish this “through select value-add opportunities with conservative capital stacks, by leveraging programmatic capital relationships and our vast, coordinated national sourcing network, which generates leads and referrals across markets.”
In all, the comments of the CRE leaders Bisnow spoke with were in line with the sentiment described in the Emerging Trends report. As one participant told the Urban Land Institute and PwC, “We are on the cusp of the next upturn in the real estate cycle, and now is the time to be thinking about planning, laying the groundwork for the next two to three years of growth.”
This is the final in a series of three articles on the complexities of the CRE market and the people who are succeeding in it. You can read the other installments here and here.
This article was produced in collaboration between Studio B and EisnerAmper. Bisnow news staff was not involved in the production of this content.
Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.
Upcoming regulations in the European Union require us to show this pop-up and ask you to agree to keep using Bisnow.com. We want to take 15 seconds to tell you what's going on:
Sound good? Just hit yes and continue on your way.