Bisnow Survey: The Road Ahead In 2025 Will Bring Rate Cuts, Higher RTO — And Cost Challenges

An overwhelming majority of Bisnow readers see lower interest rates and more people showing up to work at the office in their near future, according to responses to Bisnow’s 2025 predictions survey.

But the 1,400-plus readers who weighed in on what the new year will bring are tempering optimism with caution. Rates that remain higher than a few years ago, taxes, potential tariffs and other cost pressures are top concerns for the commercial real estate industry. 

And although the flight to quality might be old news, some brokers and owners see their ability to attract tenants or raise rents diminished unless they are willing to invest further in their buildings. 

“Making ends meet” will be the name of the game in 2025, said one Maryland-based veteran of the multifamily industry.

As part of that, all eyes will be on the Federal Reserve again this year.

Nearly 90% of the 1,432 survey respondents said there will be at least one rate cut in 2025. More than 46% of respondents think there will be exactly two, while almost a quarter believe there will be more than two.  

The numbers reflect slightly more confidence than last year’s Bisnow survey. While 82.4% of respondents predicted there would be at least one rate cut in 2024, 17.6% said there would be no cuts.

The Federal Reserve has made three interest rate cuts since September, following years of steady increases, ending the year with a full percentage point of relief from four months earlier. 

But Fed Chair Jerome Powell indicated the central bank will slow its pace of cuts in 2025.

“Timing just suggests that we're at a place where, assuming the economy develops as expected, we're at or near a level that will make it appropriate to slow the pace of adjustment,” Powell said in December.

Just 19% of Bisnow readers responded that there will be one rate cut, and singled-digit percentages guessed that rates will go back up (6.4%) or there will be no rate cuts (3.7%). Those respondents are in some good company, though, as Apollo Global Management Chief Economist Torsten Sløk in December calculated a 40% chance that the Fed would raise interest rates again in 2025.

Despite widespread optimism that numbers will move in a favorable direction, interest rates are still a top concern for respondents. Of the readers who answered a free-form question on Bisnow's survey, at least 100 cited interest rates as the challenge that would be most critical to them in 2025. Comparatively, 12 respondents cited tariffs as a top challenge. 

Bisnow collected information about respondents' occupations, locations and years in the industry for its 2025 survey but didn't require names.

“Another year of cost pressures (higher insurance rates & property taxes among others) with interest rates not dropping significantly and little ability to seek rent increases,” an insurance professional from the Northeast said of their greatest near-term challenge.

How to handle it?

“Continue to seek efficiencies and cost containment with hopefully longer term improvement,” the respondent said. 

While relatively lower interest rates may free up capital and open the door to more financing opportunities, Bisnow readers said owners won’t be quick to sell their properties. Just about 11% of respondents said selling would be the best investment strategy going into 2025, while 46.5% of respondents said holding is best and 42.7% said buying.

When asked about the biggest challenge in 2025, a Phoenix-based broker simply responded, “Getting owners to sell.” 

“Financing and finding good opportunities” will be the most critical challenge of the year, a Southeastern hospitality-focused respondent said, adding that financing will open up with lower rates, but a limited number of opportunities means “we'll have to be aggressive.”

“2025 can present potential opportunity but it won't happen overnight,” a Denver-based retail broker said. “Buyers want a deal and sellers don't want to let go of their property at a discount when market cycles are gearing to ramp back up. Good deals will present themselves but to find them it will take persistence and focus.”

Despite the widespread belief in upcoming cuts, respondents indicated they won't relieve the significant distress that may create some forced sale opportunities. The percentage of CMBS loans for office properties that are delinquent hit an all-time high of 11% in December. 

“I am currently a buyer, so I am looking for cheap deals on distressed assets due to financing conditions. I think the market will address my problem for me,” a Chicago-based investor said.

The Federal Reserve said in November that loans tied to offices in major cities remain its top CRE concern. But Bisnow survey respondents said occupancy could get a boost this year, rejecting the idea that today’s return-to-office trends are as good as it gets for the foreseeable future. 

Kastle Systems' RTO metric bounced along the low 50% range throughout 2024, so Bisnow asked respondents if it would top 60% in 2025. Just more than half said yes. Another 23.5% said it won’t happen in 2025 but will in 2026.

Just 25.6% of respondents believe the number won’t top 60% or that “those days are gone.” 

These numbers reflect a far more optimistic mindset than last year’s survey. The percentage of respondents who believed Kastle’s RTO barometer would top 60% in 2024 was about 30%. About 44% of respondents were in the no or “those days are gone” camp, much higher than this year’s 23.5%.

As recently as Labor Day, some industry insiders were accepting “a new normal,” seemingly giving up on the dream of a full return to offices and cubicles. But CEOs at places like Amazon are keeping the dream alive, and a fall survey by KPMG indicated 83% of top execs expect their companies will shift back to requiring five days of office attendance sometime in the next three years.

Multiple respondents indicated they are still willing to invest in their assets to compete amid the flight to quality that has sent office tenants fleeing to the newest buildings with the best amenities.

A New York-based broker said the biggest challenge in 2025 will be leasing office space, an issue it “will address by sinking more capital into the space and the property as a whole.” 

A general contractor in the office space said the greatest 2025 challenge will be “understanding shifts in tenant expectations post-pandemic and adjusting amenities accordingly.” 

About 31% of respondents said office will be the asset class to enjoy the biggest comeback in 2025.

But multifamily, which secured 44% of responses, was poised for the biggest and boldest reentry, Bisnow readers said. Life sciences got a notable 17.5% of votes.

Both sectors have suffered from tighter capital markets, and both have seen slowdowns since the early pandemic days when migration patterns prompted a spate of apartment-building across the Sun Belt and scientific advancement piqued investors' interest. Multifamily has been shaking off an oversupply issue since then, and life sciences faces a similar overstock issue combined with a pullback in venture capital funding.

2025's “biggest challenge will be finding deals that pencil out,” a New Jersey life sciences developer said.

“Addressing that will be a mix of creative capital solutions and finding off market deals with sellers who are realistic.”

Merger and acquisition activity in the U.S., which saw a boost in 2024, is expected to rise again by 10% in 2025, according to the EY-Parthenon Deal Barometer.

Bisnow readers also expect a boost in commercial real estate M&A deals as well as initial public offerings this year.

About 59% of respondents said there will be more CRE IPOs and M&A in 2025, while another 30% expect a similar number to 2024. Just 10% of respondents expect that number to drop.

“Inflation [is] not going away quickly enough,” an office REIT exec said. “Tighten your belts and hang on for the ride until Trump's admin gets things turned around in the RIGHT direction!”