A new report from Colliers, drawing on data from CoStar, Green Street, MSCI, Moody’s and NCREIF, reveals that commercial real estate values may be reaching their lowest point, signaling the start of a recovery. Aaron Jodka, director of national capital markets research at Colliers, told GlobeSt.com that the investment cycle shifted when the Federal Reserve began raising short-term interest rates in response to inflation. This policy change marked a turning point for the market.
However, as interest rates started to decline in the fall of 2024, Colliers observed notable changes across the sector. The firm tracked a range of metrics—including loan extensions and modifications, actual transaction values and appraisal data—to better understand the direction of the market across different property types.
Most asset types are now seeing a rebound in values. Retail and industrial sectors are leading the recovery, with the lower end of each sector showing roughly zero percent year-over-year value change. Retail properties averaged just under 5% value growth, with top-tier assets achieving more than 11% growth. Industrial properties saw an average rise of about 4%, with the upper end reaching around 14%. In the multifamily sector, the lower end experienced a slight decline of about -1%, while the average was 3% to 4% growth, and the best-performing assets posted gains of 12% to 13%. Hospitality lagged, with the lower end around -4%. Upper-end office properties showed stagnated growth, with the whole asset class averaging a decline of about -5%, and the lower end falling nearly -10%.
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Office remains a particularly complex sector. Jodka explained that there is not much activity among truly Class A office properties, which are often involved in multi-billion-dollar transactions. These deals are largely absent from the market, partly because owners of these top properties are generally in strong financial positions and can afford to wait out market cycles. “It’s easier today than it was the year before, but liquidity is a challenge in those really big check-writing transactions,” Jodka said. Many investors remain cautious due to ongoing market uncertainty. Much of the capital raised for office investments was intended for distressed assets, yet major properties are unlikely to be sold at significant discounts.
Jodka also noted that new equity entering the market finds current conditions “really appealing.” There is renewed investment interest in cities such as Boston, New York, and San Francisco. Notably, much of this capital comes from private sources—high-net-worth individuals and family offices—rather than large institutional investors like Blackstone or cross-border entities such as Canadian pension funds.
Looking ahead, Jodka sees two main scenarios that could shape investment strategies. If investors expect interest rates to rise over time, locking in fixed-rate financing now is attractive, making near-term acquisitions appealing. Conversely, if a recession seems imminent, a more cautious approach may be warranted.
“We’re at a very opportune buying moment, and investors that do acquire assets in the near term will look back favorably upon their investments,” Jodka added, reflecting a sense of optimism for those willing to act in the current environment.
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